Health Care Financing Reform: (60) Tort Reform under the House Democratic and Republican Bills

     This posting compares the tort reform provisions of the Democratic and Republican health care bills which are pending in the House of Representatives.

     The civil litigation system fails us in several important respects in medical cases.  First of all, because of the extraordinary expense of bringing one of these cases, only the most serious claims have even a chance of being redressed.  If you miss a month of work because of injury resulting from medical malpractice or a faulty medical device and you have some lingering pain no responsible attorney will do more than write a letter on your behalf.  It costs money to hire experts and depose witnesses, and small or even medium-size claims are never litigated.

     Second, most medical claims which are brought are meritless.  There are plenty of bad outcomes – pretty much everyone dies in the end – and patients and their families are often prone to blame medical care providers for the result.  As a consequence both patients and doctors have to "lawyer up," and this costs money too – most of the money that is spent for medical malpractice insurance goes to attorneys, not patients.

     Third, there is no efficient mechanism for reporting medical error and fixing the problem.   Because of the severe consequences and expense of malpractice litigation, doctors and hospitals are defensive about admitting error, and as a result incompetency and ineffectiveness among health care professionals is more difficult to address.   

     In light of the foregoing problems there is ample room for "tort reform" – an overhaul of the system of discovering and correcting instances of medical error and compensating persons who are injured as a result of such errors.

     The Republican bill, the Common Sense Health Care Reform and Affordability Act, contains more extensive "tort reform" measures than the Democratic bill, the Affordable Health Choices Act of 2009, H.R. 3962.  In my opinion, insofar as they address the question of tort reform, neither bill is worth a bucket of warm spit.

     The Republican bill contains a number of proposals limiting medical claims.  These provisions are contained in Sections 301-310, beginning at page 150 of the bill.  The Republican bill would enact the following measures: 

The statute of limitations in medical injury cases would be 1 year from the date of treatment or three years from the date of the manifestation of the injury or one year after the patient discovered or should have discovered the injury.  Children injured under the age of six would have until their eighth birthday to commence a lawsuit (too bad, you dilatory nine-year olds!);

Awards for noneconomic damages (pain and suffering) may not exceed $250,000, and the jury may not be informed of the existence of this cap – I suppose because in many cases they would be outraged;

Health care providers would be liable only for their "fair share" of the damage caused by their own malpractice.  This sounds good, but this will encourage defendants to "gang up" on one defendant, particularly if that person is dead or uninsured;

Attorney fees would be limited to certain percentages of awards, including 15% of any recovery over $600,000.  Because attorneys have to invest substantial sums into pursuing any particular lawsuit, this alone would prevent many claims from being pursued;

Evidence of "collateral source benefits" would be admissible – that is, if the plaintiff was entitled to payment from health insurance, disability insurance, Social Security, Workers Compensation or virtually any other program as a result of the injury, the defendant could introduce this fact into evidence.  In my opinion this is unbelievably unfair.  People pay for these kinds of insurance themselves, either through premiums or through their taxes, and the benefits under these policies and government programs belong to them, not to the persons who injured them;

Punitive damages may be awarded to a plaintiff "only if it is proven by clear and convincing evidence that such person acted with malicious intent to injure the claimant, or that such person deliberately failed to avoid unnecessary injury."  Punitive damages would be capped at $250,000 or two times the economic damages awarded, whichever is greater.  There are several problems with this portion of the Republican bill.  First of all, it would eliminate recovery of punitive damages in cases of gross incompetency or recklessness, and in another common situation where punitive damages are routinely awarded – when medical records have been altered by the defendant.  In addition, if the patient was a child or elderly or disabled or unemployed, and the patient is killed, not simply injured, then economic damages would be relatively small, and punitive damages would also be limited even in the most egregious cases of willful misconduct.  Finally, it is one thing to limit the amount of punitive damages that a sole practicioner might be liable for in an isolated case – it is another thing to limit the amount of punitive damages that a multinational corporation might be liable for in widely distributing a product which it knew was defective;

These provisions would preempt all state laws except state laws that impose greater limitations on medical claims and state laws that specify different damage caps for noneconomic and punitive damages.

     I am married to a physician and I used to defend physicians in medical malpractice cases, but I have to admit that the only word that springs to mind to describe the Republican bill is "draconian."  While some of these proposals have great merit, the cumulative effect this law would, as a practical matter, foreclose any reasonable possibility for any person, at any time, to recover any damages for any medical injury.  And keep in mind that these limitations on medical claims protect not only individual physicians but medical conglomerates and the manufacturers of medical devices.  The Republican bill goes too far – by a longshot.

     Republicans also contend that their bill will significantly reduce the cost of medical care.  The Congressional Budget Office respectfully disagrees.  The CBO report on the Republican bill indicates that it would create savings in the federal budget of about $5 billion per year, on the average.  This is peanuts.  Total health care expenditures in the United States this year are estimated to be $2.2 trillion.  The savings from tort care reform set forth in the CBO report on the Republican bill amount to two-tenths of one percent.

     In contrast, the "tort reform" measures contained in Section 2531 of the Democratic bill, beginning on page 1431 of that bill, seemed designed to accomplish nothing.  Under the Democratic proposal the federal government would make an incentive payment to states that adopt an "alternative medical liability law in compliance with this section."  In deciding whether or not a state should receive an incentive payment, the Secretary of Health and Human Services would have to consider whether the state law:

(A) makes the medical liability system more reliable through prevention of, or prompt and fair resolution of, disputes;

(B) encourages the disclosure of health care errors; and

(C) maintains access to affordable liability insurance.

     It is difficult to imagine what measures would qualify for subsidies under the foregoing criteria.  But the succeeding paragraph is more specific:

The contents of an alternative liability law are in accordance with this paragraph if—

(A) the litigation alternatives contained in the law consist of certificate of merit, early offer, or both; and

(B) the law does not limit attorneys’ fees or impose caps on damages.

     The Democratic bill seems designed to roll back tort reform in states like Ohio which have already adopted measures capping damages or attorney fees.  Furthermore, requiring a "certificate of merit" is fruitless unless there are penalties imposed upon the plaintiff for proceeding with a meritless case.  The Democratic bill is silent on this point.

     Furthermore, if the Democratic bill specifically rewarded or even authorized "alternative dispute resolution" of medical claims – that is, mandatory arbitration of medical claims – then it might extend a significant benefit for both patients and health care providers.  Arbitration is cheaper and quicker than litigation, and if a system of arbitration were institutionalized attorneys would not be necessary and small claims could be redressed.  But I do not read the Democratic bill encouraging "alternative liability laws" as authorizing arbitration, and the "certificate of merit" requirement is not sufficiently fleshed out to merit applause.  The Democratic bill does not go nearly far enough in weeding out junk lawsuits and improving access to the justice system.

     It would seem like this is an area where Democrats and Republicans could, if they chose, reach a compromise that would balance everyone's interests in reducing medical error and compensating victims.  That does not seem to be in the cards.

Visit Professor Huhn's website on health care financing reform for links to information about proposed legislation, studies and reports, public agencies, and private organizations concerned with this issue.

Tagged as: boehner amendment, democratic bill, H.R. 3962, health care financing reform, health care reform, health insurance reform, republican bill, tort reform