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Featured Discussion:

Welcome to our discussion on medical malpractice
By James R. Copland

Last month, we held a featured discussion between Ron Chusid, founder of Doctors for Kerry, and our own Ted Frank, a Bush supporter, which contributed to the debate on medical malpractice from each presidential candidate's perspective. This month, we're looking into medical malpractice once more. In lieu of a back-and-forth format, this month we're inviting comments from some leading thinkers on medical malpractice reform to discuss a new paper by Daniel Kessler of Stanford Business School, the Hoover Institute, and NBER, prepared for the Manhattan Institute (this site's host).

Professor Kessler, along with Mark McClellan (who now heads up Medicare), wrote the seminal study in 1996, "Do Doctors Practice Defensive Medicine." His new paper discusses how the U.S. malpractice system works, examines the empirical evidence both on the malpractice system as it exists and on various tort reform measures, and analyzes various policy approaches that have been suggested to deal with the problem.

We're expecting comments from other leaders including Philip K. Howard, the founder and chairman of Common Good and the author of The Death of Common Sense and Collapse of the Common Good; Dr. Richard Anderson, Chairman and CEO of the Doctors Company, the largest mutual (doctor-owned) medical malpractice insurer and author of an earlier Manhattan Institute study on medical malpractice; and "Syndey Smith," a/k/a MedPundit, a practicing physician who runs one of the most successful weblogs on health care issues.

I expect a wide-ranging and provocative discussion.

Medical Malpractice: Empirical Evidence
By Daniel P. Kessler

The attached essay reviews existing research on the US malpractice system. It has two objectives. The first objective is to summarize the consequences of the conventional tort-based approach to apportioning the costs of medical injuries. In brief:

-The number and dollar volume of malpractice claims has grown dramatically over the past 40 years.

-Injuries from medical care generally, and negligent medical care specifically, are surprisingly common.

-The direct costs of the malpractice system account for more than half of all malpractice compensation expenses.

-A small fraction of people injured by medical negligence receive compensation, and most people who receive compensation are not victims of
medical negligence.

-The indirect costs of the system, in terms of defensive medicine, are substantial. There is evidence of both "positive" and "negative" defensive medicine. Positive defensive medicine involves use of costly treatments that have minimal medical benefit to patients out of fear of liability. A typical example of positive defensive medicine is overuse of MRI or CT scans in patients that have headaches. Negative defensive medicine involves declining to supply care that has medical benefits. A typical example of negative defensive medicine is the refusal of some OB/GYNs to deliver babies, or to care for high-risk patients.

-Tort reforms that directly limit awards, like reasonable caps on noneconomic damages, reduce the malpractice pressure on doctors and hospitals, and in turn, reduce the prevalence and cost of defensive medicine—both positive and negative.

The second objective is to summarize what we know about alternative approaches to tort, and to propose areas for future research. Although a tort reforms are a good start, many researchers have pointed out that a tort-based system with reforms still has numerous shortcomings. In particular, I discuss the potential for a reformed system based on clinical practice guidelines; enterprise liability; binding alternative dispute resolution; and no-fault. Each of these alternatives offers advantages, but each also suffers from its own problems. For example, there is evidence that no-fault—the most radical of the alternatives—would lead to faster and more equitable compensation with lower transaction costs. But there is also evidence that no-fault could weaken incentives to take appropriate precaution, and evidence that no-fault is politically difficult to implement.

It is not possible to perfectly compensate victims of medical injury, induce physicians to take appropriate care, and control the costs of health care. Every system involves tradeoffs. Discussion, informed by research, is our best hope for reaching a social consensus on what to do.

The US Malpractice System
By Richard Anderson

Daniel Kessler is to be congratulated for another important contribution to the literature central to the current malpractice insurance crisis in the United States.
He reaches three main conclusions:
1. Doctors practice defensive medicine
2. Tort reforms reduce the prevalence and cost of defensive medicine.
3. Alternative dispute resolution systems offer some promise.
I would like to comment on each of these undoubtedly correct observations.

Arguably, all medicine in the United States today is defensive in the sense that every physician is conscious of the potential for a malpractice suit arising from virtually any of the dozens of medical decisions, large and small, that must be made throughout the course of every single day. The responsibility for patients is neither new nor unwelcome, but the high probability of being accused of professional negligence is both. Moreover, today, malpractice litigation is not only based on direct personal accusations, the process drags on over many years, and research shows the outcome will be based more on sympathy for the patientís disability than on the presence or absence of professional negligence. Such adverse judgments may cost a physician tens of thousands of dollars in increased malpractice premiums, or render him or her uninsurable, effectively ending their medical career. This pressure introduces a distorting lens into every aspect of medicine, resulting in excessive testing and the avoidance of high-risk patients.

We have more than a quarter centuryís experience with effective medical tort reforms in California with the MICRA statutes. We know that a stable insurance market has been preserved and access to care has been uninterrupted since their enactment in 1975. Physicians have a choice of multiple insurance carriers at rates that a fraction of those in other large states across the country. This allows clinical decision making to occur without the imminent threat that an adverse medical outcome could end a doctorís medical career.

No one, except the personal injury bar, can seriously argue that todayís system of medical jurisprudence is ideal, or even reasonable. More than 50% of premium dollars are appropriated by attorneys, 2% of plaintiffs and their contingency fee lawyers take 50% of all indemnity, and more than 70% of all claims are found to be without merit. Exploration of alternative systems is clearly necessary. Interestingly, many implicitly incorporate fundamental legal reforms--eliminating or reducing non-economic damages, eliminating or reducing contingency fees, and mandating periodic payments. The biggest challenge, noted by Mr. Kessler, is over-coming the special interests profiting from the present system.

About Those Surprisingly Common Injuries
By Sydney Smith

This will undoubtedly fall into the category of "things unchangeable" in our current system, but in the interest of fairness to my profession, I can't let the allegation that medical negligence is surprisingly common pass without comment. This assertion is used repeatedly by the trial bar and mainstream media to argue against tort reform, but it isn't necessarily true.

Yes, doctors make mistakes. No doubt about it. But we aren't, as the Institute of Medicine claims, the leading cause of accidental deaths in the U.S. In fact, the CDC tracks deaths due to "surgical and medical complications," and those deaths don't even make the top 100 leading causes of death. In 2000, there were 2,804 deaths due to medical complications, a mere fraction of overall accidental deaths.

The popular assertion that medical mistakes are a leading cause of death stems from the egregiously faulty statistical methods used by the Institute of Medicine in their report, "To Err is Human." The Institute based their claim that doctors are the eighth leading cause of death on a study done by a team of Harvard researchers in the 1980ís that looked at adverse events in a sampling of New York state hospitals and a similar study from hospitals in Utah and Colorado. The Institute took those studies one step further and extrapolated the data to apply to the entire nation. Itís invalid to apply data from one year (1984 in the case of the Harvard study) to another year (1997 for the Instituteís data), and itís invalid to apply data from one state to the entire nation.

The other problem with all of the studies purporting to show an epidemic of medical malpractice is one of definition. In the Harvard study, for example, the "medical errors" were such outcomes as drug complications, wound infections, and technical complications, "diagnostic mishaps" and "errors of omission." Wound infections and drug and technical complications are not necessarily malpractice. They are adverse events that are known risks of medical intervention. And while diagnostic mishaps and errors of omission may sometimes be the result of negligence, they are also much easier to identify with the benefit of hindsight than at the moment of medical decision making. The simple cough a patient had for one week that the doctor diagnosed as bronchitis but one month later turned out to be lung cancer, for example, could be classified as an "error of ommission," even though no one but a plaintiff's attorney or a chart reviewer for a medical error paper would call it that.

Yes, negligence happens. But it isn't the driving force behind escalating malpractice litigation. That's why "a small fraction of people injured by medical negligence receive compensation, and most people who receive compensation are not victims of medical negligence," as Professor Kessler has pointed out. It's the perception of injury more than actual injury that drives malpractice litigation - and an ever growing intolerance for risk of any kind.

The real tragedy of our system is that it fails so miserably to sort real negligence from perceived negligence.

Health Courts a Sensible Solution
By Philip K. Howard

Our system of justice, which is supposed to provide incentives for good care and to compensate those that are injured by bad care, accomplishes neither goal. Instead, it makes it difficult for the injured to get compensation (mainly because of high costs of litigation), and, because of almost universal distust of modern justice by healthcare providers, drives up costs with defensive medicine and drives down quality by chilling professional interaction. The rising premiums, which reflect actuarial experience, drive doctors in certain specialties and areas out of business altogether.

Dan Kessler's piece summarizes the learning that demonstrate these effects, points out the need for further research, and most helpfully, analyzes how various reforms -- caps on damages, enterprise liability, alternative dispute resolution and no-fault proposals -- might fix these problems.

The conclusion that I reached from this work is that we need a system of justice that is 1) reliable: trust is key to avoid skewing of incentives towards defensive practices; 2)fault-based but not unduly punitive: providers need to know they will be reasonably accountable for their errors; 3) dramatically more efficient: justice that spends 55% on transaction costs is justice denied. Additional goals, not mentioned by Kessler, are incentives for transparency and to improve standards of care.

As Kessler suggests, none of the proposed reforms meets all, or even most, of these goals. That's why a growing coalition of patient advocates, providers and payers is coming together behind the idea of creating special administrative health courts -- fault-based, with neutral experts, written rulings, expedited proceedings (and lower attorneys' fees) and non-economic damage awards that are predictable, and based on the type of injury. The goal is to make justice in healthcare reliable. Only then can choices be made to align incentives with the common good. Both Sen. Frist and the Democratic Leadership Council have endorsed this type of major overhaul.

The debate over medical liability reform is now characterized by accusation and rancor. Dan Kessler brings the issues back to the realm of fact, and thus provides a foundation from which those who in good faith wish to reform the system can move forward.


Welcome to our discussion on medical malpractice, James R. Copland, October 26, 2004, 09:14 PM

Medical Malpractice: Empirical Evidence, Daniel P. Kessler, October 27, 2004, 01:19 PM

The US Malpractice System, Richard Anderson, October 27, 2004, 02:07 PM

About Those Surprisingly Common Injuries, Sydney Smith, October 27, 2004, 11:18 PM

Health Courts a Sensible Solution, Philip K. Howard, November 01, 2004, 12:13 PM


Obamacare Decision: Reactions, July 2012
Law School Faculty Diversity, May-June 2012
Class Actions, May 2012
Constitutionality of Individual Mandate, March 2012
Human Rights and International Law, February-March 2012
The constitutionality of President Obama's recess appointments, January 2012
Do caps on medical malpractice damages hurt consumers?, December 2011
Trial Lawyers Inc.: State Attorneys General, October 2011
Wal-Mart v. Dukes, April 2011
Kagan Supreme Court nomination, May-June 2010
Election roundtable, November-December 2006
Who's the boss, September 2006
Medical judgement, July 2006
Lawyer Licensing, May 2006
Contingent claims, April 2006
Smoking guns, July 2004


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.