I remember learning in high school that diplomacy consists of saying nasty things in nice ways. Your first post treated my questions about the Trial Lawyers, Inc. project quite diplomatically. Perhaps you should be less diplomatic from now on. Then I might have a clearer idea of why you are so insistent about eliminating personal injury claims from medical care without putting in place a superior alternative, or why you think some shadowy conspiracy of trial lawyers is substantially responsible for the current failings of the American health care system and, moreover, is going to cripple that $2 trillion annual enterprise unless restrained by tort reform legislation.

Why be so coy in response to my pointing out that you favor damage caps and blame the legal system? Why deny that caps are your preferred medical malpractice reform while, in the course of that denial, rehashing all your arguments about the virtues of damage caps? Why refer me to your organization’s work on health care when your leading example consists of having federal food and drug regulation preempt (i.e., eliminate) state personal injury claims? The introductory paragraph to your report’s section on malpractice is much more direct:

“While several states have been successful in enacting substantial reforms, the American Medical Association continues to list 20 states ‘in crisis’ over malpractice litigation. Overall, then, these efforts have yet to derail the med-mal gravy train that has been one of Trial Lawyers, Inc’s longest-running and most lucrative business lines.”

What are these measures you consider successful, substantial reforms? Golly, they’re damage caps and other MICRA-style reforms, not administrative compensation systems, enterprise liability demonstrations, or error disclosure and early mediation programs. What states does the AMA consider “in crisis”? Gosh, it’s hard to know, because the AMA’s definition changes, but usually the answer is states that haven’t yet enacted MICRA-style tort reforms. What is the point of these reforms? Gee whiz, it sure seems like they’re designed to discourage personal injury claims.

Another quotation I remember from high school was Emerson’s: “A foolish consistency is the hobgoblin of little minds.” Everything in your Trial Lawyers, Inc. report on health care, and everything in your post to me, is painstakingly “on message.” As you admit, your report “was never designed to be a policy document.” Indeed, it’s a political document – something I was truly disappointed to discover, and something I wish I had known before accepting your invitation to comment on it publicly.

Well, I have a “message” too, though not a political one. Medical malpractice reform should be about health care, not about lawyers. Medical liability expanded during the late 20th century because of the tremendous success of modern medicine, not its failure. And I don’t think that litigation realistically comes within an order of magnitude of threatening medicine’s success in the future. Liability is never truly “unlimited,” whether or not damages are capped. Rather, liability expands incrementally as medical care improves, costs of receiving services and remediating injuries rise, and care delivery processes become industrialized. In the late 1980s, now UCLA law professor Mark Grady argued persuasively that negligence law is primarily a response to technologic progress. (You might know Prof. Grady – he used to be Dean and Chairman of the Law and Economics Center at George Mason University School of Law, hardly a front for the trial bar). I believe that periodic crises in availability and affordability of physicians’ malpractice insurance largely reflect the failure of cyclical insurance markets – at least as traditionally structured and regulated – to keep pace with industrial change in medicine.

I make sure to convey this message loudly whenever the opportunity presents, mainly because health system change is an uncomfortable truth for both partisan camps battling over lawyers and tort reform. However, I think it is impossible to have a meaningful discussion of public policy without occasionally getting off message to acknowledge complexity or display common sense. For example, you take me to task for telling a New York Times reporter at some point that caps should reduce liability insurance premiums but not being a fan of caps. Incidentally, I’m flattered that Walter Olson would bother to comment on my comment – I don’t keep a scrapbook of press clippings so I never knew he had.

There’s nothing inconsistent about those positions, although if I were a pro-tort advocate rather than an academic I would undoubtedly be attacked for straying from my partisan message. Malpractice insurance is third-party coverage; one buys it only if one thinks one will be sued and held liable. So it’s pretty obvious that if the chance of being sued or the amount of liability drops, so should the premium in anything approaching a competitive market. For the same reason, it’s pretty obvious that payouts, not investment income, will be the principal driver of premiums – although the long delays involved in resolving malpractice claims make investments a non-trivial consideration. But that doesn’t mean that caps will lower premiums quickly or seamlessly, that enacting caps is the most cost-effective way to lower premiums, that caps won’t reduce safety incentives in some situations, or that the redistribution that caps accomplish is socially desirable. On the last point, I’m always surprised that tort reformers, despite their business allegiances, fail to grasp the basic economic fact that, administrative costs aside, a reduction in insurance premiums unaccompanied by a reduction in insurable events is merely a wealth transfer, not a net savings to society.

I think you fairly characterize my position as being that caps are too marginal to bother with, at least as a stand-alone measure. On the other hand, I don’t think you are being honest with yourself, much less your readers, to reject issues of political will and political feasibility as intellectually irrelevant to public policy – to my eye, it seems that you stay so faithfully on message mainly to keep your own political coalition together.

But let me put it into plainer English for you. Here’s what I wrote about caps in 2003: “If Congress enacts MICRA-style caps on damages, no national tragedy will follow. But neither will any lasting benefit to health care be achieved. The same will be true if Congress fails to do anything after prolonged political debate. … Government will simply have missed a significant opportunity for truly productive change.”

Why do I reach this conclusion? Because in the 1970s and 1980s crises, physicians framed the malpractice problem as frivolous lawsuits and excessive awards. On this account, caps seemed a reasonable solution. But we know a lot more about both the health care system and the malpractice system, including its insurance component today than twenty years ago. As a result, we have a longer list of problems to address, and significant tensions among them (I’ll leave it to you to defend why the longer list is ignored by partisan tort reformers):

1. Compensation for avoidable injury is inadequate.

I can’t imagine how flat caps on damages would help get more injuries fairly compensated in conventional litigation, or would fail to harm the most severely injured. But perhaps you see possibilities I don’t.

2. Too many avoidable errors occur.

Again, one would think that capping damages alone would do nothing to reduce errors, and might increase errors by removing financial incentives for safety improvement.

Now, I can almost see the saliva dripping onto your keyboard as you mouth “defensive medicine.” I agree that defensive medicine matters; in fact, I co-authored the most recent empirical study of defensive medicine to appear in the health policy literature (JAMA, June 1, 2005). Defensive medicine is important for more than the aggregate-health-care-cost arguments intended to sustain political momentum for tort reform between crisis periods even though physicians have easy access to cheap malpractice insurance. Defensive medicine is important during malpractice crises because physicians who fear an imminent loss of affordable coverage treat patients worse as a result – not only engaging in wasteful “assurance behavior” such as expensive diagnostic testing, but also performing unnecessary invasive procedures that plausibly increase risks of physical harm and avoiding types of medical care and types of patients they consider unduly risky, even when those patients need services. But MICRA-style reforms are tangential to defensive medicine. The deeper causes of defensive practice are clinical uncertainty, fragmented medical practice, and a malpractice insurance system that is as isolating and unforgiving in bad economic times as it is oblivious to health care quality in good economic times.

3. Litigation is too slow, too costly, too uncertain, and too unpleasant.

Physicians and patients should be intimates, treating each other with respect, concern, and compassion. Third-party liability coverage turns them into strangers, and litigation turns them into adversaries. Caps do not help. At most, MICRA results in somewhat less of a bad process, not a better process. Ask any doctor in California.

4. Premiums for primary coverage are too volatile and, for some physicians, too expensive.

This is an insurance market problem. Caps help, but very bluntly. Why not address risk-pooling problems and the clinical bottlenecks they create during crisis periods directly? For example, try revamping specialty- and geography-based rating practices for physician liability coverage and moving more of the market into stable, diversified institutional settings?

5. Excess coverage and reinsurance are too costly for hospitals and other institutions.

The biggest insurance problem during the current malpractice crisis is high-dollar coverage for institutional defendants, say $10 million or more per claim. Even in the most severe malpractice crisis, hospitals can handle smaller cases just fine (a $250,000 cap is a rallying cry, not a policy prescription, and is irrelevant once one looks beyond individual physician defendants and the narrowly exposed liability carriers that insure them). Caps might help in the large cases, though again very bluntly, but not when applied only to non-economic damages as their proponents – bowing to political reality – generally urge. Economic damages, not non-economic damages, are the principal source of financial exposure in the largest malpractice cases – usually involving newborns or children who have suffered lifelong debilitating injury.

Here’s an idea for a better reform: neutral, court-appointed experts to estimate survival, lost income, and future medical needs. Physicians obsess over the credentials of clinical experts testifying as to whether they are good or bad doctors because their professional reputations are on the line. However, it’s hired-gun “economic expert witnesses” who really affect claim outcomes, but nobody in the tort reform community seems to care.

That’s my list. I’ll be interested in your response. I’d prefer in our next installment to go into a couple of specific issues of your choosing in greater depth. So far we have mainly talked past each other. A second approach would be to start discussing a curious assertion you made about the Trial Lawyer’s Inc. Health Care report: that it tries to “show the business model of the plaintiff’s bar.” I would be fascinated to learn more about that business model, and in fact I expected to see a detailed analysis of it in the report. But, alas, that dog didn’t bark.

Bill

PS: If you want a sound-bite to debate, try this one: “The best malpractice reform is universal health coverage.”