HISTORY

Although Congress did not act on medical liability reform in 2007, Representative Michael Burgess (R-TX) did introduce legislation (H.R. 3509) in October modeled after the successful Texas tort reform law.  The legislation would cap noneconomic damages against any single provider at $250,000 and wrongful death total damages at $1.4 million. The legislation would also provide specific criteria for expert testimony in civil medical liability cases and would provide certain instructions for juries to consider in their deliberations.

In several past Congresses, the House consistently voted to advance liability reform, most recently passing H.R. 5, the “Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act,” in July 2005. The legislation, passed on a vote of 230-194, would substantially improve the medical liability system by limiting noneconomic and punitive damages. However, liability reform proponents have never had enough Senate support to make progress on medical liability reform legislation.

In the past, federal legislation to reform the liability system and resolve this crisis in health care has included a number of key provisions: 1) expedition of claims by requiring alternative dispute resolution and other processes; 2) establishment of a reasonable statute of limitations for claims; 3) fair share rules, providing that each party sued is liable only for that party’s several share of any damages; 4) caps on excessive noneconomic and punitive awards; 5) prohibitions on punitive damages in lawsuits involving medical products approved by the FDA; 6) maximization of patient recovery by limiting excessive attorney’s fees; 7) provision of uniform standards across state lines by preempting conflicting state laws; and 8) movement of multistate class action lawsuits from state to federal court.

The primary concern with such legislation seems to be the cap on noneconomic damages.  Opponents charge that such caps would be unfair to victims of medical malpractice. Proponents have responded that plaintiffs can still receive considerable awards in terms of economic damages.

A newer idea that has gained in significance is the establishment of "health courts."  Health courts are specialized administrative courts designed to handle medical injury disputes. In the health court concept, trained judges, assisted by independent neutral experts, would settle malpractice disputes. Victims would be compensated under a liberalized standard of avoidability.  A compensation schedule of predetermined values provides horizontal equity amoung claimants.

Some congressional attention has focused on the idea of special health courts. The U.S. Senate Committee on Health, Education, Labor, and Pensions held a hearing on June 22, 2006, to consider bipartisan legislation sponsored by Senator Mike Enzi (R-WY) that would create pilot projects for special health courts. The legislation has been introduced again in the 110th Congress as a part of S. 1783. On July 13, 2006, the Health Subcommittee of the House Committee on Energy and Commerce also held a hearing on innovative medical liability reforms, which featured health courts.

Congressional advocates of medical liability reform now face higher hurdles. Liability reform legislation was already problematic in Congress because of the Senate’s 60-vote procedural requirement to address controversial legislation.  With a majority in the Senate united against caps on noneconomic damages, reaching a 60-vote margin was a practical impossibility in 2006 and is even less likely in 2008.

Despite little action in Washington, states continue to be active laboratories for medical tort reform. According to the National Conference of State Legislatures, more than half of the states have placed limits on damage awards.  In fact, in 2005, more than 400 medical liability reform bills were introduced in 48 states.

Illinois has become a critical state to watch in the tort reform movement. A Cook County judge has declared the state’s medical liability law, enacted in 2005, to be unconstitutional because it violates the separation of powers.  The decision will be appealed to the Illinois Supreme Court. If the court decision stands, it would be a blow to patients and physicians in the state.  Once the Illinois law went into effect, more malpractice insurers began selling policies in the state, increasing competition. The average annual premium for an obstetrician in Illinois is $125,000 today, down from over $200,000 before enactment of tort reform in the state.  One major insurance carrier (Medicus) has already said rates will have to be reassessed if statutory damage caps are removed.

Also in Illinois, the trial bar advocated legislation that would change the way compensation is determined in liability cases.  In cases with multiple defendants, it would not matter which defendant is found to be most at fault.  Rather, the party with the “deepest pockets” would be tabbed to pay the damages. A coalition of business and civic organizations has kept this bill from progressing, but trial attorneys are expected to continue advocating this change.

The Illinois courts may need to look to Michigan for guidance. Michigan’s tort reform law has been challenged by the state’s trial bar several times, but has been repeatedly upheld by the Michigan Supreme Court. In Michigan, malpractice insurers just announced continued liability coverage rate cuts, up to 14 percent for obstetricians, 12 percent for neurosurgeons, and 25 percent for orthopedic surgeons.

The consulting group Tefen has listed liability reform as one of the top 10 health policy issues that need to be addressed in 2008.  According to the firm, 59 percent of all physicians order unnecessary procedures and tests to protect against possible litigation. Reducing physician liability costs could cut health system costs by 5 to 9 percent.

States that have not enacted liability reform continue to come under scrutiny. Health experts in Hawaii met in November to discuss the state’s increasingly severe shortage of physicians and pinpointed high liability costs as a key reason the state has trouble attracting doctors.  In Maryland, the media began reporting in January that rural areas in the state have critical shortages in primary care, emergency medicine and anesthesiology and that more than a third of the state’s doctors are 55 and older.  Maryland’s refusal to pass liability reform is listed as a major contributing factor in its inability to recruit young physicians.

Discussion of alternative solutions, including the creation of special “health courts” to determine the legitimacy of malpractice suits, continues.  In addition to legislation pending in both houses of Congress, the Robert Wood Johnson Foundation has provided $1 million to promote the creation of health courts in six states – Colorado, Maryland, Massachusetts, New York, Pennsylvania, and Wyoming.

Meanwhile, the number of states determined by the American Medical Association (AMA) to be in a medical liability “crisis” continues to grow – from 13 in 2002 to 21 in 2006. The AMA says liability costs in these crisis states cause severe access problems for patients as more physicians are forced to give up their practices or limit their availability. 
One state has virtually solved its liability crisis, and its experience is one from which we can pattern reforms for the entire nation. In 1975, California enacted the “Medical Injury Compensation Reform Act” (MICRA).  By any measure, this law has been an enormous success for patients and consumers, as well as doctors and hospitals.  The key reform capped noneconomic damage awards at $250,000.  The law did not cap economic or “actual damages.”  Thus, in California, patients are entitled to sue for lost wages, medical costs, and other actual damages that can total millions of dollars.  However, it is noneconomic damages, or “pain and suffering,” as well as punitive damages that have skyrocketed and are primarily responsible for the liability crisis.

MICRA has been an unqualified success for patients and consumers as they have received compensation for actual damages, and they have received it faster. Also, MICRA has led to much lower malpractice insurance rates than would otherwise be the case in California, allowing physicians and hospitals to continue providing patients life-saving care. Likewise, Texas, which adopted similar legislation, has seen liability insurance premiums stabilize and the number of practicing physicians in the state increasing, reversing a previous downward trend.

While additional legislation at the state level is needed, fixing the problem state-by-state is not enough to solve the crisis.  Although many states enact liability reforms, as witnessed above, these reforms are often repealed or undermined by their state Supreme Courts.   Further, the delivery of health care is interstate for health care patients, providers, and health plans, making national reforms a necessity.

The negative consequences of inaction are many.  The median medical liability jury award has come close to tripling from 1997-2004, increasing from $157,000 to $439,400. The increase in awards results in increases in medical liability premiums. In states without reasonable limits on awards, malpractice premiums have risen between 36 percent and 113 percent over the same time period.

Dramatic increases in malpractice insurance premiums cause doctors and other caregivers to leave their practices.  Hospitals have been forced to close their doors while nursing homes file for bankruptcy. The medical malpractice crisis is particularly severe in the obstetrics field; because of this, expectant mothers and their babies are left without prenatal and obstetrical care. In fact, nearly half of America's counties have no practicing obstetrician to deliver needed care. In short, millions of Americans are stranded with little or no access to adequate care.

Ultimately, patients pay for this crisis in the form of higher health benefit premiums and copayments, and in the form of excessive tests and procedures resulting from defensive medical practices. The U.S. Department of Health and Human Services has estimated that liability reform could save $70-126 billion per year on “defensive” medicine alone.

It is estimated that employers, who provide health insurance coverage for over
170 million employees and their families, and other payers for health care services would save between $60 and $80 billion per year if legal reforms were enacted. That is enough money to provide each of the 47 million uninsured Americans with a check for almost $1,700 every year toward the purchase of health insurance coverage.

Senior citizens, covered by Medicare, also pay for lawsuit abuse.  The Department of Health and Human Services concluded that legal reforms would save the Medicare program alone a staggering $40 billion per year. It is estimated that Medicare pays only half of the health care costs of seniors, with much of the rest paid by seniors themselves through copayments, deductibles, and premiums for Medigap and long-term care coverage. Thus, the $40 billion in higher costs is paid by seniors.

Because of high liability costs, too many hospitals, doctors, and other providers cannot invest in new technology, they cannot afford to add critical health care professionals to their staffs (including nurses), and they cannot make other improvements that would help improve the quality and safety of health care. Liability costs also cause the removal of important medical services and products from the market and stop the development of new treatments and therapies that would save lives.


THE FUTURE

While health care debates in the 2008 campaigns will focus on how to expand coverage for the uninsured, medical liability reform will also get a fair share of attention. Rudolph Giuliani, in particular, made tort reform a key component of his health reform proposal. Senator Barack Obama (D-IL) and Senator Hillary Clinton (D-NY) are also both on record (and, in fact, co-authored an article on the issue in a 2006 issue of the New England Journal of Medicine) saying that the medical liability problem should be addressed through improved patient safety instead of “areas of intense disagreement” such as caps on financial damage awards.

There will likely be more action on the campaign trail than in Congress over the next several months.  A number of lawmakers, including the aforementioned Michael Burgess and Senator John Ensign (R-NV), are keeping the issue alive in their respective chambers.  But the trial bar continues to steadfastly oppose even a congressional debate on the issue, so congressional consideration is highly unlikely.

On the positive side, some congressional Democrats have informally engaged in conversations to explore ways in which a bipartisan compromise could be reached on this issue.

In addition, the states may see ongoing activity as governors and state legislatures continue to have some success moving liability reform measures forward.