Why Damages Caps Won’t Fix Malpractice Laws: Peter Orszag

By Peter Orszag | February 25, 2014
medical doctor

I have long believed that reforming U.S. medical malpractice laws could bring significant benefits, and new research supports that notion. Before conservatives get too excited, though, the evidence suggests the right way forward is not to impose arbitrary caps on liability. Instead, we should change the basis for finding a doctor guilty of malpractice in the first place.

The core problem with the medical liability system is that doctors are evaluated by the standard of “customary practice,” defined as what doctors typically do. Customary practice, however, might not reflect the best medical science.

Peter Orszag AP Photo

Peter Orszag
AP Photo

Capping damages for medical malpractice can do little to solve this problem, but changing the standard against which doctors are evaluated would. In particular, doctors should have a safe harbor from malpractice suits if they follow evidence- based protocols published by a professional medical association. The Center for American Progress and others have proposed exactly this type of approach, and have also provided details about how it could work.

Professor Michael Frakes of Cornell Law School has done pathbreaking research on the benefits of moving away from customary-practice rules. In a new analysis, Frakes and Anupam Jena, a professor of health-care policy at Harvard Medical School, examine how malpractice laws affect mortality rates, avoidable hospitalizations, adverse events to mothers during childbirth and other measures of health-care quality. They then assess two types of reforms: changes to damages caps and changes to the local customary-practice standard.

Frakes and Jena find that only moving away from a local customary-practice standard has a significant effect on health quality. More specifically, states that had already shifted away from local customary practices and toward national practices (which are more likely than local practices to reflect the latest medical knowledge) experienced substantial reductions in mortality rates, avoidable hospitalizations and adverse events, relative to other states. (Interestingly, the impact was not symmetrical. States that weakened their standards when they moved to a national benchmark did not experience a reduction in health-care quality.)

“The literature to date has largely failed to appreciate the substantive nature of liability rules,” Frakes and Jena write, “and may thus be drawing limited inferences based solely on our experiences to date with damages caps and related reforms.”

Admittedly, the study examined a shift from one type of customary practice (local) to another (national), rather than a wholesale shift to a safe harbor based directly on evidence- based protocols. Nonetheless, the results are highly suggestive that we’ve been barking up the wrong tree on malpractice reform.

The rapid digitization of health care can support a shift to a safe-harbor system and away from the arbitrary customary- practice standard. Clinical decision-support software is being used more and more and, by the end of the decade, may inform almost all choices that doctors make. Therein lies the opportunity: If doctors knew that they would be protected from liability if they followed the clinical-decision guidelines (unless they had a good reason not to) and that it would be easy for them to prove such compliance, the safe harbor might have an even bigger effect on their behavior than the Frakes-Jena study suggests it would.

Policy makers looking for ways to improve the value of health care should reform the malpractice system — ideally by altering the customary-practice standard to establish safe harbors. With most Democrats in Congress are opposed to any kind of malpractice reform and most Republicans are narrowly focused on damages caps, changes at the federal level seem unlikely anytime soon. For now, state governments should take the lead by reforming their own malpractice systems.

(Orszag is vice chairman of corporate and investment banking and chairman of the financial strategy and solutions group at Citigroup Inc. and a former director of the Office of Management and Budget in the Obama administration.)

Editors: Mary Duenwald, Brooke Sample.To contact the writer of this article: Peter Orszag at orszagbloomberg@gmail.com. To contact the editor responsible for this article: Mary Duenwald at mduenwald@bloomberg.net.

 

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Latest Comments

  • February 25, 2014 at 3:04 pm
    Libby says:
    Funny, Dave. You have a problem with John Edwards becoming filthy rich by allegedly fleecing insurance carriers of claim payments, but you have no problem with Wall Street fl... read more
  • February 25, 2014 at 2:03 pm
    Dave says:
    Decent idea, but bad judges, bad juries and ambulance chasers will prevent such a solution from being effective. Let me start with silicone breast implants. Science has since ... read more
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