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Hyman and Silver: "Medical Malpractice Litigation and Tort Reform: It's the Incentives, Stupid"



David Hyman and Charles Silver have a lengthy attack on malpractice reform rhetoric and caps in the Vanderbilt Law Review. The paper, aside from equivocation on the term "frivolous", is largely effective in criticizing some of the oversimplifications of politicians advocating for reform (a problem that Hyman and Silver themselves have been guilty of in the other direction), but ignores four critical and interrelated aspects of the more subtle case for reform.

First, while Hyman and Silver talk much about incentives, they somehow manage to go the whole paper without once addressing the concept of overdeterrence—except indirectly, in a "But cf." reference to Rubin and Shepherd, in footnote 152 on the next to last page. This becomes crucial, as we shall show below.

Second, there is only indirect acknowledgment of the problem of outlier cases with disproportionate damages that have a disproportionate effect on the system. It is similar to arguing that drunk driving is not a problem because well over 99% of Americans aren't killed by a drunk driver in any given year, except worse, because the argument is made with statistics like "In particular, they found that the �right� result (i.e., true positives and true negatives) was reached about 73% of the time, with �error claims� accounting for 64% of all claims and 84% of total indemnity payments" (p. 1100). It's the effect at the margin that is important.

Third, for all of Hyman and Silver's emphasis on incentives, there is little mention of the incentive for attorneys to manufacture claims where none exist in the cases of patients severely injured without medical fault, most notably birth injuries. The effectiveness with a jury of a Geoffrey Fieger in using abusive tactics that are sometimes, but certainly not always, overturned in higher courts, in obtaining multi-million dollar awards cannot be ignored in this discussion, but is. There can be no question that the lawsuit described by Dr. Merenstein in JAMA (and mentioned in footnote 148 of the paper) has nothing to do with improving medical incentives. The occasional seven- or eight-digit verdict may just be an "anecdote", but it is one that insurance companies that care about holding adequate reserves are required to respect, and it is a problem that non-economic damages caps are an imperfect attempt to solve.

Fourth, Hyman and Silver, in many places, effectively assume the conclusion of the appropriateness of the status quo rules for determining malpractice. Underlying data that works from that premise can be no refutation of the argument that that standard is wrong. It's not unfair for them to do so: I appear to be the only reformer suggesting that medical malpractice liability standards are entirely misplaced, and I have yet to do so in a published journal. While Hyman and Silver do acknowledge problems in the system because of the lack of a dispositive consensus evidence-based medicine defense (1132-33), I would argue that this does not go far enough because it creates a danger of ossifying medicine by effectively creating strict liability for medical innovations.

But it is not unfair to criticize their paper for failing to recognize the consequences of the regime they propose as optimal.

Hyman and Silver (like Tom Baker before them) are to be commended for their honesty and intellectual consistency in acknowledging that they believe that current malpractice insurance rates are too low; the most dishonest claims in the reform debate are those of reform opponents who pretend that insurance rates are unrelated to liability costs, and that insurance rates can be decreased without decreasing those liability costs. But nowhere do Hyman and Silver recognize the likely effects of raising malpractice insurance costs to reflect the level of liability they argue exists. As their paper title notes, "It's The Incentives, Stupid." Under Hyman/Silver's statistics, doctors are arguably responsible for more damages in malpractice liability than they earn in actual incomes.[FN*] This would deter not just malpractice, but practice—and that is optimal only if the problem with medicine is the fact that there are any human beings administering it.

That said, Hyman and Silver propose a number of reforms that are not completely inconsistent with measures I would support:

  • "The first prescription for improving health care quality must therefore be to increase the strength of market forces." Unquestionably so. Statements of newly elected legislative leaders, however, suggest that the trend may well be in the wrong direction here.
  • Hyman and Silver, without citing to Jeffrey O'Connell's earlier work on the subject, suggest a form of an "early offer" settlement system that would speed payments to plaintiffs in return for capped non-economic damages from the effective admission of liability.
  • Evidence-based medicine as an absolute defense to liability, which I discuss above.

Other proposed changes from the paper are potentially disastrous, but are discussed in such slim detail that they shall have to wait for a later date to be addressed. I have elsewhere discussed the fallacy of assuming one can use ex post malpractice results to determine the competence of all but the most egregiously bad doctors.

[FN*] Hyman and Silver never explicitly make this claim, but it is implicit in the statistics and factual arguments they propound:

  • The number of actionable negligent incidents is 530% to 8200% higher than the number of malpractice claims. (1090-1091)
  • Studies like HMPS understate, rather than overstate, the amount of negligence. (1098)
  • Plaintiffs are entitled to twice the damages they actually receive when they receive damages. (1105)
  • The system withholds payments from plaintiffs who are entitled to recover. (1112)
  • A qui tam-style system should be used to reduce "under-claiming," complete with a new cause of action barring retaliation against whistleblowers. (1132)
  • Existing reforms that have successfully reduced liability expenses should be "rolled back." (1134)

If one accepts all of these claims, the implication is that total malpractice (and related frictions from qui tam) liability should be 13 to 200 or more times higher than it is today, accounting for anywhere from a quarter to 400% or more of doctors' incomes, and more in high-risk professions. To quote the authors' last sentence, "To ignore the power of the basic insight that people avoid activities that cost them money and engage in activities that make them money would be not just stupid, but profoundly stupid." This concluding sentence is correct, but has the implication opposite to what the authors apparently intend.

 

 


Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.