Bill,

I'd like to thank you very much for offering to participate in our PointOfLaw.com featured discussion series. We're excited to have someone of your stature here, and your deep knowledge and understanding of health care policy and litigation should give our readers a lot to think about.

To start with, I'd like to reach out on what I feel are significant points of agreement. First, I think it goes without saying that we both agree that American health care, while far better than a generation ago, could be substantially reformed.

Second, I think we agree that the legal process in the U.S. needs some reform as a component of overall health policy reform (you say as much: "I agree that conventional malpractice litigation serves society poorly").

Third, I agree with you that health policy is a vastly complicated subject and that the "legal process" is hardly the only factor important to health care quality, innovation, or access. While I do believe firmly that litigation matters—-and matters a lot—-it's but one of the panoply of factors that make American health care suboptimal. The Manhattan Institute's agenda reflects that fact. Over in the Center for Medical Progress, we have three senior fellows looking at various aspects of health policy:

· Bob Goldberg, who directs that Center, spends a lot of time thinking about how government regulation affects medical innovation; he chairs a task force that’s exploring how the Food and Drug Administration should reform for the 21st century.
· Regina Herzlinger, a Harvard professor, looks at the problems created by the disconnect between health purchasing decisions and the consumer; her Market-Driven Health Care defined the agenda, and her Consumer-Driven Health Care is a tome of information on this debate.
· David Gratzer, a practicing Canadian physician, looks at government sponsorship and control of health care, from Medicare and Medicaid to price controls; his Code Blue: Reviving Canada's Health Care System exposed many of the myths about Canada's socialized health care system.

Folks who are interested in many of these health care issues should check out our companion website, Medical Progress Today, which every week has tons of new information on all aspects of health policy.

But what the Center for Legal Policy looks at is litigation. That's my area, that's what we focus on at PointOfLaw.com, and that's what the Trial Lawyers, Inc. series is about. I think that the role of litigation in health care is sufficiently important in its own right to deserve in-depth coverage—-indeed, far more coverage than we were able to provide in our necessarily short, user-friendly report. The report isn't designed to be a comprehensive look at American health policy but rather a comprehensive overview of lawyers' business strategy for litigating in the health care sector, and the major effects of that litigation.

My fourth major point of agreement with you is that one-size-fits-all caps on noneconomic damages are not a holistic solution that would ameliorate all the negative effects American litigation has on the quality, accessibility, and improvement over time of American health care. I don't think Trial Lawyers, Inc. suggests otherwise. As you graciously note, "you don’t obsess over [MICRA-style reforms and] you also support 'medical courts' as an example of a 'comprehensive' solution."

But you also go on to say: "politicians and the public see only two options: MICRA-style reforms or keeping the current litigation system. Your report toes this line and strongly urges MICRA-style reforms . . . ." I think that’s really a misreading of Trial Lawyers, Inc.: Health Care. I never mention damage caps in my Message from the Director, nor does the report mention them in its Introduction. The report does mention damage caps in the medical-malpractice section in the following contexts: (1) in pointing out that Park Ridge, Illinois physicians who relocated to Wisconsin after their premiums jumped to $500,000 were likely attracted by Wisconsin’s then-low malpractice insurance rates, $50,000—and suggesting that the premium difference was likely due in part to Wisconsin’s then-extant damage caps; (2) in pointing out that "Texas Medical Liability Trust lowered its premiums 12 percent the first year and another 5 percent the second" following that state’s adoption of med-mal damage caps; and (3) in pointing out that lawyers have challenged caps in various states as unconstitutional. We also allude to this litigation strategy in the public relations section, in pointing to Wisconsin’s noteworthy ruling this summer finding the state's damage caps unconstitutional.

Apart from those references, the only place the 20 substantive pages in the Trial Lawyers, Inc.: Health Care report mentions damage caps is in the 2-page Outlook and Conclusion. That section of the report does give significant treatment to MICRA-style reforms, since they constitute a significant portion of state-level reforms in addition to a major part of the President’s preferred reform, the HEALTH Act. And yes, Trial Lawyers, Inc. does give favorable treatment to state damage caps in the following context:

In all, 27 states now limit noneconomic damages in medical-liability cases.

While states' laws vary in their effectiveness, in those states where damage caps and other broad reforms have passed, malpractice premiums have generally come down and doctors' shingles have stayed up. Since Texas legislators imposed a $250,000 limit on noneconomic damages in 2003, malpractice suits have dropped by half, and the five largest insurers have announced rate cuts that will save doctors and hospitals $50 million a year. An Agency for Healthcare Research and Quality study found that rural counties in states with such caps saw a 3.2 percent rise in doctors per capita. Over the long run, medical-malpractice reforms have been highly successful: since California passed its $250,000 noneconomic damages cap in 1975, its medical-malpractice premiums have risen "only" 245 percent, versus 750 percent nationwide.

So you’re right if you mean to suggest that I believe the following: noneconomic damage caps, all else being equal, reduce medical malpractice insurance costs and increase the supply of doctors/hospitals/services that are limited, on the margin, by such costs. I think that we agree on that point, too, assuming you were accurately quoted by The New York Times this winter: "There is a strong consensus among people who have really studied the issue that caps on damages would tend to keep costs down and make liability insurance more affordable for doctors."

That's really the only claim vis-à-vis damage caps that Trial Lawyers, Inc.: Health Care makes. And the report strongly suggests that a "more comprehensive" reform is needed, including federal preemption of state common law tort claims regulated by the FDA and, as you acknowledge, health courts or other experimental state reforms to better align medical malpractice liability with its policy objectives. The treatment of such reforms is sparse precisely because, as noted before, Trial Lawyers, Inc. was never designed to be a policy document but rather to show the business model of the plaintiffs' bar—-and if you don't think that there's a business model underlying, e.g., Dickie Scruggs's lawsuits against non-profit hospitals (that Judge Loretta Preska described as "orchestrated assault on scores of non-profit hospitals, necessitating the expenditure of those hospitals' scarce resources to beat back meritless legal claims"); or the class-action civil RICO suits against HMOs; or most drug and medical device mass tort litigation; or certain segments of the medical malpractice bar, including the firms that score exceptionally big wins for dubious infant cerebral palsy claims—-then I'm happy to debate the point. Trial Lawyers, Inc. is also designed to describe the cost of health care litigation.

And assessing that cost is, perhaps, where we differ, which perhaps is why we come to somewhat different positions on the appropriateness of damage caps. You make the following claim: "To health policy specialists, the medical liability system is deeply flawed in all three component parts: patient safety, liability insurance, and legal process. To general tort reformers, the whole ballgame is legal process." But I don't think that caricature is right. We claim that problems in the legal process, while not the sole variable for patient safety, adversely affect patient safety and drive up the cost of liability insurance.

You point to three different variables of interest: quality, access, and cost. I'd add to that list innovation, because the cost and quality of health care over time should matter deeply to us as a society, not just its static cost and quality today. And I'd also note that your categories are by no means mutually exclusive. Higher costs mean lower access, and thus lower quality.

I and other critics of the current legal system argue that our status quo litigation system lowers the quality of and access to health care today, as well as retards innovations that will improve health care over time. Patient safety thus suffers. What's the basis for this claim? Well, in a nutshell, if the status quo litigation system does a poor job of discouraging mistakes—-and I think the evidence supports that proposition, but we can discuss it—-and it discourages behaviors that make us safer, we’re less safe.

The important point here is that lawsuits in the health care field aren't like traditional torts, which provide compensation for injuries caused by accidents from strangers (or, more precisely, individuals who aren't contractually related). The key feature of traditional torts is that the behaviors lawsuits discourage, in general, make us less safe. Carrying wild animals, detonating explosives, discharging firearms, building pits and potholes, driving automobiles—-while there may be a place for each, we're generally safer as a society if people do less of these behaviors. But performing brain surgery, delivering babies, and developing life-saving drugs and devices are precisely the opposite: we're generally less safe as a society if we do these activities less.

Therein lies the rub. If our tort system isn't doing in practice what it's supposed to do in theory--i.e., providing appropriate incentives for harmful behaviors--and if it’s instead merely taxing useful behaviors, then it's a big problem, and lowering that tax in and of itself is salutary.

And that brings us back to damage caps, and the problem with the other statement you made to The New York Times: "there is a universal consensus that caps would do absolutely nothing to reduce medical errors or to compensate injured patients. If anything, caps on damages would make those problems worse." Leaving the compensation question to the side, I would strongly dispute that there’s a "universal consensus that caps would do absolutely nothing to reduce medical errors." My colleague Walter Olson responded, I think effectively:

That's a pithy sound bite, but it's rather misleading as regards the problem of "medical errors". Advocates of damage limits have adduced considerable evidence that the prospect of unlimited liability can seriously compromise the quality of medicine by 1) curtailing providers' availability and 2) encouraging resort to defensive medicine. If trauma centers and rural ob/gyns close their doors, and if doctors prescribe unnecessary antibiotics, CAT scans and caesarean sections for fear they will be blamed if something goes wrong, the number of "medical errors" may not be higher (depending on how those are defined), but the quality of care will nonetheless have suffered. Assuming for the sake of argument that damage caps reduce doctors' incentive to be careful, the question then becomes whether this effect outweighs or does not outweigh the benefits to the quality of patient care of improving availability and reducing the scope of defensive medicine. Notwithstanding the conclusion to which a casual reader might jump from Prof. Sage's comments, there is assuredly no "universal consensus" as to where this balance comes out.

I think he's right. Are damage caps the comprehensive solution that medical malpractice reform—-not to mention broader health care liability reform—-deserves? No. But, as you admit, they are efficacious as to cost, and if in fact such caps don't reduce (and perhaps improve) health care quality and access, then they’re unambiguously socially beneficial (though undeniably against the interests of the trial bar).

So while I don't think that med-mal damage caps are a panacea by any stretch, to me the weight of the evidence suggests that they're a good idea. Merely because an idea isn't the whole ball-of-wax doesn't mean we should oppose it. For instance, the Class Action Fairness Act is hardly sufficient to fix all the problems with class action lawsuit abuse (see George Priest's discussion here). But it should help the class action magnet court problem, which the Manhattan Institute Center for Legal Policy helped to document here, here, here, and here. So it's a step in the right direction.

I feel the same way about med-mal noneconomic damage caps (at least at the state level). That doesn't preclude my supporting other, more comprehensive reforms—-and I welcome discussion of some of the ideas you've developed in the Pew project and elsewhere. But you don't provide an objection to damage caps in principle, and you haven't persuaded me that damage caps would make matters worse, not better. In an intellectual policy discourse, I don't think it's appropriate to say something along the lines of "policy X is good—-but policy Y is better; and I'd support policy X only in combination with policy Y." Such horse-trading may be appropriate for politicians, but honest intellectual reflection should dictate that we say something more along the lines of "policies X, Y, and Z are all improvements on the status quo." Now, it's certainly legitimate to say that policy Y is the best; or to say that policy X or Z is actually harmful; or to say that policy X is so marginal, relative to policy Y, that we shouldn't devote much time to it and should try to shift the discourse toward policy Y instead.

The final approach is, I think, where you're coming down. I'm still not persuaded that policy X, i.e., damage caps, is really that marginal—-and I don't think that appeals to authority (e.g., "the health policy community") will do much to persuade me. Indeed, it's interesting that the health policy community, as you characterize it, hasn't had more traction for its ideas—-and it may be worthwhile to explore the ideas and ponder why that is.

So I've gone on for far longer than I'd expected, but I think I've at least framed the discussion from my perspective, and identified a lot of common ground. The topic is vast, and we still have a lot to cover. I look forward to your response—-and again, I'd like to thank you for your insights.

Jim