Take Two: Looking at the Med-Mal Crisis from Both Sides

By | October 25, 2004

National editor Andrea Ortega-Wells recently moderated a “Take Two” debate discussing the hot topic of medical malpractice, and what, if any, reforms are needed. The debate featured Paula Sweeney, partner with the law firm of Howie & Sweeney in Dallas, Texas, and past president of the Texas Trial Lawyers Association, and Rita Nowak, assistant vice president, Property/Casualty, Property Casualty Insurers Association of America (PCI).

Insurance Journal: The question at hand is, the insurance industry and doctors claim the medical litigation system is in a state of crisis. Do you agree with this statement, and why or why not?

“We need to foster a culture so all stakeholders … are able to develop systems that will really improve the overall quality of care and take the litigation out of the system.” – Rita Nowak

Paula Sweeney: I disagree with the statement that the medical litigation system is in crisis, but I agree very strongly that there is a healthcare crisis and it’s in a couple of different areas. One, there is a quality of care crisis. We know that there are over a hundred thousand unnecessary deaths every year in this country, according to a Harvard study, due to preventable malpractice medical errors. So there is definitely a huge quality of care crisis that is not being addressed. The second area where there is in fact crisis is in availability of quality insurance for doctors. We completely agree that doctors are having a horrendously difficult time getting meaningful coverage at reasonable rates.

The disagreement that we have, very strongly, is that this is in any way related to a medical litigation system crisis, because the statistics absolutely don’t bear that out. The per capita number of lawsuits in the country across the board in malpractice cases in U.S. courts has gone down, not up, over the past 20 years. So people believe false sound bites about there being an explosion of frivolous lawsuits. That is absolutely not happening.

Rita Nowak: PCI definitely agrees that the current medical malpractice litigation system is in crisis. We believe doctors in many parts of the country, particularly those who provide specialized care, are scaling back services or actually abandoning their practices. Physicians are being forced to limit their services; they’re retiring early, or they are moving from state to state in order to be able to find a stable liability premium. All of these are seriously threatening the access to quality care to Americans. We know that the emergency room specialists are also scaling back services, we know that the OBGYNS and family physicians in certain situations have actually stopped delivering babies and stopped performing high risk procedures. Some hospitals are even limiting neurosurgical services.

A survey was just released by the American College of Obstetricians and Gynecologists. It was noted in this survey, which was released on July 16, one in seven of these members have stopped delivering babies for fear of being sued. For the third year in a row, the number of medical students entering in the OB/GYN specialty has declined in 2004. Only 65 percent of the residency slots were filled by U.S. medical school seniors, compared with 86 percent a decade earlier. We believe that the escalating costs of liability insurance premiums have reached unaffordable levels for an increasing number of medical practices, which is a direct result of the litigation system. We believe that this has been a tremendous impact on Americans. The cost of healthcare is spiraling upwards. We agree with the AMA that currently there are 20 states in crisis today.

IJ: Speaking of the reform debate, many in medical malpractice reform have used the Medical Injury Compensation Reform Act (MICRA), California’s 1975 law, as a model for reform legislation in states. Among other things, MICRA limits noneconomic damages such as pain to $250,000 for plaintiffs and suffering, and imposes a sliding scale for attorney fees. I’d like to know, in your opinion, why MICRA is perhaps a good or bad example for medical malpractice reform.

Nowak: PCI strongly believes that MICRA should actually be a model for states to adopt. Its vote was enacted in 1979 and has a proven track record in reforming the out of control healthcare liability system. It certainly has worked effectively in the state of California. One thing I would like to note here, it’s just not the cap. MICRA has very significant provisions. It’s the cap; it’s the introduction of evidence of collateral source payment; the use of periodic payments for future damages; providing a sliding scale limit on attorneys contingencies. It provides for a shorter statute of limitations; requires a 90-day notice of intent to sue. Again, it is the entire package that makes it a great model for reform. From statistics that we have here, and I believe these are noted in other reports as well, California’s medical liability disputes are settled 26 percent faster, saving doctors and patients years in the courtroom. The patient then is able to move on. This is a significant statistic. Generally again, we are finding states that have adopted caps and you specifically mentioned the word caps in your question here, we are finding that the premiums are more affordable, the increases are nowhere near what they are in states that are without caps.

Sweeney: We agree very strongly with what Ms. Nowak said in that there is a crisis for doctors getting coverage. Where we diverge is right here—which is that the litigation system has anything to do with it because we know that less than one cent of every healthcare dollar is in anyway related to the litigation system. What MICRA did, did not work. And you’ve got to get that across to your listening audience. MICRA did nothing for insurance rates and did nothing for the litigation system until several years later the legislature in California came back and passed insurance regulation reform and that is what’s need here.

The problem you have isn’t with lawsuits. For example, in Texas, lawsuits have not increased, payments have not increased, but premiums have gone up exponentially, and largely because of underwriting practices of writing horribly risky doctors; number two, bad investment practices. The third component to that is unregulated physician mutual insurance companies that aren’t governed by the insurance commissions of the various states with terrible underwriting and investment provisions. But it is very important to know MICRA did nothing to reduce rates until the legislature came back and forced the carriers to reduce their rates long after MIRCA and the caps and all of the rest of the package that Ms. Nowack mentioned came into effect.

IJ: We know that there are some clear differences here. Can you address, perhaps, in what areas, if any, do the parties agree on this debate?

Sweeney: Absolutely we agree there is a crisis in the quality of care. Absolutely we agree that there is a terrible problem for doctors trying to get insurance at reasonable rates. But the problem that we have with regulating it by coming in and dismantling the civil justice system, is that for example in Texas, we just passed in the last session 2003, something very similar to MICRA modeled on MICRA that contains almost all of the components that Ms. Nowak was mentioning. And thereafter, almost all of the carriers in the state have asked for a rate increase, even though we have the most Draconian possible regulations now in place, they’re still asking for rate increases. The only company that hasn’t is one that had increased its rates by over 100 percent in the last several years; they’ve come down almost 12 percent, which is an almost nonexistent reduction.

Sixty percent of physicians at a recent hearing, by far a majority of physicians in Texas, have shown since the caps were put in place and since all of the other restrictions were put in place, no better availability of quality coverage. So what we need isn’t regulation of the litigation system; what we need is regulation of the insurance system. And that’s what has made the difference in California and would across the board. That will help in the one area where we do agree which is getting insurance to doctors.

Nowak: We do agree with Paula’s statement in regards to the issue of insurance, in the affordability of insurance; however we do disagree in regards to the cause. We strongly believe it is truly the litigation system here that is driving the cost of the insurance premiums. Clearly I believe it was the GAO report (year 2003) that indicated that increasing awards appear to be the primary driver; it is not loss of investment income. We are very much regulated on how we can set rates and how we can utilize investment income. It is a direct result of underwriting losses coming from large judgments.

IJ: Recently there was a new study from the Harvard School of Public Health that suggests flat caps on noneconomic damages may limit patients’ abilities to be fairly compensated for pain and suffering. The authors found that reductions imposed on grave injuries were seven times larger than those for minor injuries. People suffering from pain and disfigurement had particularly large reductions in their awards. The study suggests that a schedule, or sliding scale, may be preferable. What are your reactions to this survey and to the idea of a sliding scale on pain and suffering awards as opposed to a flat cap? Would a sliding scale be more equitable?

Nowak: I have not read the report in detail at this point in time; however, I believe we need to approach studies like these with a degree of caution. I think there is a significant degree of confusion in the public eye regarding the word ‘term.’ As we know, economic damages refers to compensation for verifiable monetary losses. However, noneconomic damages refers to compensation for subjective, non-monetary losses such as pain, suffering, inconvenience, emotional distress and loss of enjoyment of life.

Again I am going to have to cite the MICRA success here, we’re seeing that this has been in effect since 1975 and we truly believe that a cap on noneconomic damages will help mitigate the problem that we are currently having with the medical malpractice litigation crisis. We believe that caps will help ensure fair, but not excessive compensation. PCI strongly believes that injured patients are very much entitled to full and unlimited compensation for their economic losses, but again we strongly believe that the noneconomic cap will ensure equitable compensation across the board to all patients and to all citizens.

Sweeney: MICRA was not a success. MICRA was a failure. Rates did not go down and in fact still have not gone down. They continue to go up, only more slowly and only after insurance reform was passed by the Legislature. So caps did not make MICRA a success. Now would a sliding scale be fairer than a flat cap? Yes, because what you have happen is somebody with a relatively minor injury, where a jury unfettered by caps, might award $250,000 for pain and suffering. In that instance that person is going to be fully compensated cap or no cap because their injury is within the range that the jury can award without being affected by the cap.

If somebody with a very severe injury—a horrible disfiguring burn injury, or someone who becomes quadriplegic—some devastating traumatic injury like that where a jury would be inclined to award a larger amount than $250,000 in recognition of the evil of the harm that has been inflicted upon that person, that person won’t come anywhere near full compensation and yet they’re the people for whom everyone agrees compensation should be most readily available. And so what happens is you drive a huge burden on to the folks who have the massive injury or the devastating loss and they get nowhere near appropriate compensation, whereas somebody with a relatively small injury does get full compensation. So if it is a flat cap, it is unfair, arbitrary, and capricious and completely takes away the jury’s right to measure the harm. If it is a sliding scale it is more fair, although it prevents a jury from completely addressing the harm, but it is better than a flat cap.

IJ: From the insurance industry’s perspective, what else can be done to find solutions to this med-mal debate that can be considered fair to the insurance industry, doctors and patients? Would it help to have more private insurers writing medical malpractice coverage and how would a more competitive market for insurance be achieved?

Nowak: Other than meaningful tort reform, you have got to look at the cost driver—what is the driver? And certainly these jackpot jury decisions and judgments are a major contributor. We strongly believe that tort reform is necessary to address this medical liability crisis. We believe in sharing greater fairness in the court system and establishing more certainty, and that is critical from an insurers’ perspective, more certainty regarding the potential pay-out in medical liability crises will help bring stability and more competition to the medical liability market place. There are two primary drivers of rate levels associated with claims; it’s obviously the direct losses and underwriting expenses. The bottom line right now is that medical liability premiums are strictly tied to the estimate of future losses. There is no possible way for us to raise rates in order to cover past losses. Frivolous lawsuits and expensive jury verdicts are truly the critical factors driving the current crisis. Unless those are resolved you are not going to get a competitive market.

It is very critical that there is legislation at the state level that will allow reform. When reform is implemented, you will see more insurers coming into the marketplace because there will be certainty for them. Without certainty with regards to providing estimates they will not be able to actuarially predict what their rates should be. So what are the other solutions? There is no other solution at this point in time—tort reform is the answer.

Sweeney: The answer is absolutely not tort reform. The answer is to stop the real crisis which is the crisis of malpractice. Stop the 100,000 unnecessary deaths. Stop the over a million needless catastrophic injuries that happen every year. Improve the quality of healthcare. For instance, the new guidelines that have just come out for preventing surgery on the wrong part of the body that require that the part of the body be properly identified by the physician before any surgery is done.

For instance, the steps being recommended by the leap-frog group, which is an industry sponsored group sponsored by entities like General Electric, General Motors and IBM that are sick of their rates going up for coverage for their employees are trying to improve the quality of healthcare. That is one huge step that needs to be taken. Another is to end the cheap sound byte type attacks, such as calling it jackpot justice. A big verdict “jackpot” comes when someone’s loved one, spouse or child is killed by a drunken doctor and they call that a jackpot. That is the kind of debate that has to stop and the real debate has to be, “How do we keep people from being killed and maimed by bad doctors?” where the real crisis is. How do we regulate these carriers that are utterly unregulated? These mutual carriers, which in many states this isn’t a small part of the market, because in Texas, 60 percent of the doctors are insured by an unregulated company that has very little insurance department regulation of any kind placed over them. They are not strictly regulated. Stop that kind of abuse of the system, regulate these doctor-owned mutual carriers that are not properly governmentally regulated at this stage.

And lastly, require, as they have in Massachusetts, public disclosures so consumers can be educated in their choice of healthcare providers, so they can’t hide behind peer review and they can’t hide behind all these statutory protections. And you can go to the Web or you can go to public sources and find out that your doctor has been sued 27 times or you can find out that the hospital you are thinking of going to has an out of control infection problem that you have no way of knowing about in the current system and therefore you unwittingly go there and become a victim yourself of malpractice. So those steps can be taken rather than this cheap “jackpot” justice type of sound bite analysis that’s being done time and time again which means nothing and does not address the root cause of the problem.

IJ: What can be done to prevent medical errors from happening and what more can be done by not only the medical community but the insurance community and the legal community to prevent such errors? How would risk management fit into this equation?

Nowak: Quality of care will decline obviously if a patient does not have access to a good physician. We here at PCI strongly support the need to foster a culture that encourages professionals in organizations to work together to identify problems in providing care, evaluating the causes and using that information to improve overall care for patients. The problem we have is that the current litigation system does not encourage a culture of safety. It encourages defensive medicine, and encourages a fear that if this information becomes available, the doctor, the system, all parties within the system will be sued.

We need to foster a culture so all stakeholders, including the patient, are able to develop systems that will really improve the overall quality of care and take the litigation out of the system. The idea here is that we want doctors to be able to provide the best care in the world and we need to do that now. We have to move the litigation train away from this very critical solution.

Sweeney: Secrecy is not the answer. We agree that there must be a system that allows self-identification of errors, that is one of the things the leap-frog group has pushed and other studies recently have pushed. That’s real important, but it’s also very important not to hide that from the patient. If the error has been caused by negligence, if a drunken doctor has crippled somebody, and that is made known to the family, the family should have access to the civil justice system. They should be compensated for negligently caused harm. So you can’t disassociate the two. We can’t say we are going to have an open system but you can’t use the information to access your rights or to redress the wrong that has been done to your family. We must have openness, self-identification of errors and reduction of the real crisis, which is the crisis of maimed and crippled patients caused by medical negligence.

About Andrea Wells

Andrea Wells is a veteran insurance editor and Editor-in-Chef of Insurance Journal Magazine. More from Andrea Wells

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