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July 10, 2006

Discretionary immunity for medical professionals

By Ted Frank

Hi, Peter; we’ve had pleasant discussions before, and I look forward to this one.

I’ve long been frustrated by the state of medical malpractice: cases like this, these, or this. These cases are more than just anecdotes. First, the big-money awards, even if they are outliers, distort the system for everybody, because insurance is based on expectations and worst-case scenarios (which are arithmetic means and variance) rather than the medians that so many statisticians use to argue there is no problem with the system. But they also reveal an underlying randomness that disturbs one sense of justice. Even if one believes that the legal system gets it right most of the time (and even the recent study reform opponents cite shows a shockingly high error rate), the chance of a jackpot verdict encourages meritless litigation.

One partial solution is non-economic damages caps. Unbounded incommensurate damages are an appeal to a jury’s prejudices and sympathies, and cannot be rationally calculated. Replacing them with a schedule or legislatively-created bounds is a sensible solution, and one that both constrains the effect of legal errors and reduces the incentive to bring meritless litigation or litigation where the measurable economic effects are small.

But that solution is only a partial solution, because a large part of the problem is the big-money cases where doctors are blamed for the happenstance of being present for bad results. Outcome bias significantly affects even trained professionals; there is no reason to think lay juries do better. As I noted when I first raised this issue, using non-economic damages caps to reduce an erroneous $30 million verdict to an erroneous $15 million verdict is unlikely to be a satisfactory solution.

What struck me is the number of anti-reform advocates who not only argue that the status quo should not be reformed, but that there isn’t enough malpractice litigation. In his book, The Medical Malpractice Myth, Tom Baker essentially argues that there should be twenty times more malpractice litigation than there is. Baker does not seem to have thought out the consequences of his conclusion, which is that the amount specialist doctors should pay in malpractice damages and expenses should exceed the amount that doctors currently receive for giving medical care. That is, to say, that Baker’s arguments make sense only if you believe that medical care would be better off if it weren’t for all these damn doctors, since very few would continue to practice under such circumstances. Baker’s proposal ameliorates the financial effect on individual doctors (if not the additional cost of spending time performing CYA documentation and depositions) through enterprise liability, but the impact is the same: the marginal expected value of an additional doctor to an enterprise would be negative, and the costs of providing medicine would skyrocket, if not completely collapse.

Baker’s statistics are based on the Institute of Medicine study, which alleged that some huge number of deaths were attributable to “medical errors,” though the study didn’t distinguish between deaths that shortened life by a matter of minutes and those that cut short a life by years or decades. Studies like IOM’s bother me when they’re cited by either side of the debate: if IOM’s methodology for determining “medical error” is accurate, why do we not prefer it to that of the legal system? (And if one believes the small sample in the IOM study, the legal system was not much more accurate than a coin-toss.) But the problems with IOM’s methodology struck me: as Richard Anderson noted, the study determined negligence by averaging together two doctors’ assessments of the records, and disagreement was frequent. The Institute wasn’t even able to reproduce its results.

Combine the lack of consensus within the medical profession as to what optimal care is with the problem of outcome bias, and one can only conclude that the legal system is incapable of second-guessing discretionary medical decisions. And that is before we get to the inherent inefficiency of a compensation system that devotes a majority of every dollar to the lawyers and witnesses and administrators rather than the “victims.”

I am a firm believer in judicial modesty. There are some questions that the judicial system is not well-equipped to answer, and when it does try to answer them, it is at least as likely to make things worse as better, which suggests that it is better not to make the attempt at all than to impose the gigantic costs of litigation in achieving a random walk in public policy.

In my series of posts, I noted the “business judgment” rule, (a comparison I’ve since discovered doesn’t originate with me), but courts abstain from interfering in all sorts of discretionary decisions besides those of business judgment for officers and directors: immunities are granted for judges, for the discretionary decisions of government officials, for volunteers, for government officers operating in unclear constitutional territory. Though legal professionals are hypothetically held to the same standard as doctors, in practice, they are granted far greater scope of immunity. In each case, the immunity is justified by the courts because of the fear of that liability would deter socially beneficial activity.

Why not give that same immunity to the discretionary decisions of medical professionals?

That is not to abolish the action of medical malpractice. When one sees anecdotes defending medical malpractice suits, they point to the cases of the inebriated doctors, the surgeons who operate on the wrong limb, the wrong medication (or dosage) issued to a patient. But these are different kind of medical malpractice than the second-guessing kind that disturbs medical professionals.

Perhaps it really is the case that the medical profession is full of butchers who can’t wait to sloppily kill their patients through negligence the second the fear of medical malpractice liability is removed. But I strongly suspect that medical quality would improve, rather than decline, from the addition of legal certainty to the process by the addition of discretionary immunity. If nothing else, the experiment would give us sound data on whether the status quo is a net positive or negative compared to the alternative.

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Medicine and Law



Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.