Republican Malpractice Myths

[media id=9730] In recent days, Republican leaders have scored a series of political victories in their eternal quest for tort reform. Last week, the

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In recent days, Republican leaders have scored a series of political victories in their eternal quest for tort reform. Last week, the Congressional Budget Office (CBO) told Senator Orrin Hatch (R-UT) that an onerous package of malpractice curbs he championed could save the government an estimated $54 billion over 10 years. That came on the heels of President Obama's latest offer to support limited tort reform as an olive branch to recalcitrant Republicans balking at his health care proposals, including funding for a $25 million pilot program.

But largely overlooked in the heated discussions of damage award caps, special health courts, expert panels and national compensation schedules is the inescapable truth that the medical malpractice system has only a negligible impact on overall American health care costs. Republican horror stories of a torrent of baseless malpractice suits producing "jackpot justice" that fuels rising premiums for physicians and patients alike while driving doctors from practice simply don't comport with reality. The overstated, overblown, over the top and often outright false GOP claims suggest that the Republicans' real target is not the flawed American malpractice system, but instead the nation's trial lawyers whose campaign contributions help bankroll the Democratic Party.

Here, then, is a look at Republican Malpractice Myths:

  1. An Explosion of Malpractice Litigation
  2. A System Plagued by Frivolous Lawsuits
  3. Rising Damage Awards Key to Higher Malpractice Premiums
  4. Rising Malpractice Insurance Rates Driving Doctors from Practice
  5. Medical Malpractice Reform Would Save U.S. $200 Billion Annually
  6. Defensive Medicine Costs $200 Billion a Year

For the details and data behind each, continue reading.

Myth #1: An Explosion of Malpractice Litigation

Back in August, former Alaska Governor Sarah Palin offered her diagnosis of the medical tort system on her Facebook page:

I went my whole life without needing a lawyer on speed-dial, but all that changes when you become a target for opportunists and people with no scruples. Our nation's health care providers have been the targets of similar opportunists for years, and they too have found themselves subjected to false, frivolous, and baseless claims. To quote a former president, "I feel your pain."

Sadly, the data are clear. If anything, the United States has too few, and not too many, malpractice actions.

In 2003, the Institute of Medicine of the National Academies issued a devastating report detailing the scope and gravity of the safety of the U.S. health care system. Two studies showed that "at least 44,000 people, and perhaps as many as 98,000 people, die in hospitals each year as a result of medical errors that could have been prevented." As the New York Times' David Leonhardt found in September 2009, "After reviewing thousands of patient records, medical researchers have estimated that only 2 to 3 percent of cases of medical negligence lead to a malpractice claim." And as Tom Baker, director of the Insurance Law Center at the University of Connecticut School of Law and author of The Malpractice Myth, noted in August, the rate of claims is going down:

"We have approximately the same number of claims today as in the late 1980s. Think about that. The cost of health care has doubled since then. The number of medical encounters between doctors and patients has gone up -- and research shows a more or less constant rate of errors per hospitalizations. That means we have a declining rate of lawsuits relative to numbers of injuries."

Myth #2: A System Plagued by Frivolous Lawsuits

Just 10 days after Palin's predictable lawyer bashing, Arizona Republican Senator John Kyl followed suit with his own indictment:

Of course, malpractice lawsuits serve a valuable purpose for those who have truly been wronged, but malpractice law is often abused by some trial lawyers who flood courts with baseless lawsuits.

As it turns out, not so much.

As Baker noted, epidemiological studies on medical malpractice in the 1970s, 1980s and 1990s found about one serious injury per 100 hospitalizations, with only about only 4 to 7 percent of those injured bringing a case.

The myth of rapacious trial lawyers and their greedy clients filing baseless malpractice claims was also debunked by a May 2006 study from the Harvard School of Public Health. The report, which appeared in the New England Journal of Medicine, exhaustively examined 1,452 medical malpractice cases "to determine whether a medical injury had occurred and, if so, whether it was due to medical error." In a nutshell, the study found that by and large the American system of medical personal injury compensation works, with valid claims receiving compensation and frivolous ones not:

Most of the claims that were not associated with errors (370 of 515 [72 percent]) or injuries (31 of 37 [84 percent]) did not result in compensation; most that involved injuries due to error did (653 of 889 [73 percent]). Payment of claims not involving errors occurred less frequently than did the converse form of inaccuracy - nonpayment of claims associated with errors.

Myth #3: Rising Damage Awards Key to Higher Malpractice Premiums

In an October 20, 2009 press release in which he proclaimed, "We all work for the American people, not the trial lawyers," Senator Kyl announced:

"To help guard themselves from ruinous lawsuits, physicians must purchase expensive medical liability insurance - often at a cost of $200,000 or more for some specialists, such as obstetricians and anesthesiologists."

But the data show that on average, inflation-adjusted physician insurance premiums declined in the 1990's from their mid-1980's peaks before the accelerating increases of this decade. Something other than dubious lawsuits and jury awards must be behind the fluctuation.

That something, as Baker suggests, lies with the insurers' underwriting cycles.

Numerous studies have consistently shown that increasing damage awards from malpractice explain only a small portion of the rapid rise in health care costs. A January 2004 study by the Congressional Budget Office (CBO) found from 1986 to 2002, malpractice insurance premiums jumped 15% per year, while the average damage award rose only 8% ($95,000 to $320,000). The jump in malpractice premiums has been almost double the rate of increase in health care costs per person, and roughly four times the rate of inflation. The CBO report also points out that "although the cost per successful claim has increased, the rate of such claims has remained relatively constant. Each year, about 15 malpractice claims are filed for every 100 physicians, and about 30 percent of those claims result in an insurance payment." As the CBO concludes, GAO data shows that about half of the increase in doctors' malpractice premiums is due to the drop in annual investment returns by the top 15 insurers. Recent low profit rates and market consolidation among insurers is creating additional upwards price pressure.

In The Malpractice Myth, Tom Baker's analysis supports the CBO's conclusion that insurance underwriting cycles, and not more malpractice lawsuits or larger damage awards, are largely responsible for the increase in physicians' insurance premiums:

"It's not crazy to think that malpractice lawsuits are the reason for the insurance premium hikes...Not crazy, but not right, either...The insurance industry goes through a boom-and-bust cycle that creates malpractice insurance crises like this pas one. Lawyers, judges and juries have little or nothing to do with it."

All of which suggests Orrin Hatch's push for a cap of $250,000 on non-economic damages - mirroring laws in Texas, Mississippi, Arizona and other states- is both the wrong diagnosis and the wrong prescription.

Myth #4: Rising Malpractice Insurance Rates Driving Doctors from Practice

Back in 2004, President George W. Bush in his famously garbled declaration decried malpractice lawsuits and premiums he claimed were driving physicians from the business:

"Too many OB/GYNs aren't able to practice their love with women all across this country."

And on this point, the University of Connecticut's Baker found some confirmation in the data for some regions, primarily rural areas, and for some specialties, including obstetrics. (It is worth noting that the South and West have experienced "long-standing supply problems in rural areas" due to "inadequate financial opportunities for doctors" coupled with a lack of health insurance among the people there.)

So, it comes as no surprise that a cavalcade of Republican leaders, including Sarah Palin, Rick Perry, John Cornyn, John Kyl cited the same study showing malpractice awards caps enacted in 2003 in Texas fueled an increase in the number of physicians in the Lone Star State:

According to the Pacific Research Institute, medical licenses in Texas have increased 18 percent in the last four years, with 7,000 new doctors moving to the state.

The actual impact of the Texas law, however, remains in dispute. The state's rising population, its 48th place ranking in physicians per capita, its staggering percentage of uninsured, its lack of an income tax and the 147% jump in malpractice premiums in 2003 alone make gauging the unique contribution of malpractice caps difficult to assess. Regardless, health care costs in Texas have continued their upward spiral.

What seems beyond dispute is that other malpractice cap states like Mississippi have not seen an influx of new doctors. The Jackson Free Press took exception to Governor Haley Barbour's claim that tort reform meant that physicians "have quit leaving the state and limiting their practices to avoid lawsuit abuse":

But non-partisan facts show that doctors were never really leaving the state in the first place. A 2003 Government Accountability Office report, "Medical Malpractice: Implications of Rising Premiums on Access to Health Care," took a hard look at five medical "crisis" states--Mississippi, Nevada, Pennsylvania, West Virginia and Florida--and dismissed reports of doctor emigration from states.

Information compiled by the American Medical Association--which supports tort reform and President Obama's vision of health reform--shows that the number of physicians in Mississippi rose steadily in years leading up to tort-reform legislation in 2004, and even slowed its increase following 2004.

From 2004 to 2005, the state actually recorded no increase over the 5,872 doctors counted in 2004, and added only 18 new physicians in 2006. The year 2007 reflected an increase of 71 physicians--still less than the 145-increase between 2000 and 2001 and the 99-doctor increase between 1998 and 1999. Even the time between 2002 and 2003--arguably the years of the worst tort abuse, according to tort-reform proponents--experienced a growth in the state doctor population of 140.

Myth #5: Medical Malpractice Reform Would Save U.S. $200 Billion Annually

On October 4th, Senator Kyl made this wholly unsubstantiated claim to CNN's John King:

"Almost everybody agrees that we can save between $100 billion and $200 billion if we had effective medical malpractice reform."

By "almost everybody," John Kyl meant the leading lights of the Republican Party and its amen corner in the right-wing media.

The mythical $200 billion figure has its genesis in a 1996 paper by Daniel McKessen and Mark McClellan, who later worked for President Bush. Looking only at heart patients in hospital settings, the paper concluded that "malpractice reforms that directly reduce provider liability pressure lead to reductions of 5 to 9 percent in medical expenditures without substantial effects on mortality or medical complications." Extrapolated to the entire $2 trillion U.S. health sector, the hypothetical savings from that magical 9% would catapult to $200 billion a year.

For the mouthpieces of the right (and even some, like Bill Bradley, on the left), that figure became the gospel truth. For her part, Sarah Palin lifted the fuzzy math directly from Dr. Stuart Weinstein, with the American Academy of Orthopedic Surgeons:

"If the Kessler and McClellan estimates were applied to total U.S. healthcare spending in 2005, the defensive medicine costs would total between $100 billion and $178 billion per year. Add to this the cost of defending malpractice cases, paying compensation, and covering additional administrative costs (a total of $29.4 billion). Thus, the average American family pays an additional $1,700 to $2,000 per year in healthcare costs simply to cover the costs of defensive medicine."

But as FactCheck.org, Media Matters and a host of others documented, both the GAO and the CBO itself long ago rejected that very extrapolation. The Congressional Budget Office found "no evidence that restrictions on tort liability reduce medical spending" and concluded:

"In short, the evidence available to date does not make a strong case that restricting malpractice liability would have a significant effect, either positive or negative, on economic efficiency."

In 2006, the CBO examined the links between tort limits and health care spending, with results it deemed "inconsistent" and "mixed." That followed CBO's findings two years earlier which documented the minimal impact that increases in medical malpractice insurance premiums have on overall health care costs. As Media Matters noted:

A 2004 CBO report concluded that capping awards at $250,000 for non-economic damages in medical malpractice lawsuits "would basically save only 0.4 percent of the amount that's spent now" on health care. According to the report, "[M]alpractice costs amounted to an estimated $24 billion in 2002, but that figure represents less than 2 percent of overall health care spending. Thus, even a reduction of 25 percent to 30 percent in malpractice costs would lower health care costs by only about 0.4 percent to 0.5 percent, and the likely effect on health insurance premiums would be comparably small."

Myth #6: Defensive Medicine Costs $200 Billion a Year

Given the comparatively insignificant direct costs of the malpractice justice system itself ($30.4 billion in 2007 for damage awards, lawyers' fee and administrative costs, according to the actuarial consulting firm Towers Perrin), the question of savings from tort reform proposals hinges on so-called "defensive medicine." This represents the extra procedures, tests, doctor referrals and hospitals visits physicians order just to protect them from potential future litigation.

Estimates of such wasteful spending vary. As the Times' David Leonhardt noted:

Amitabh Chandra -- a Harvard economist whose research is cited by both the American Medical Association and the trial lawyers' association -- says $60 billion a year, or about 3 percent of overall medical spending, is a reasonable upper-end estimate.

Not to be outdone, writing in the Wall Street Journal Philip K. Howard put the figure slightly higher. Make that three times higher:

"Eliminating defensive medicine could save upwards of $200 billion in health-care costs annually, according to estimates by the American Medical Association and others."

On this point, the CBO weighed in two weeks ago. As Director Douglas Elmendorf wrote on his blog, the CBO has revised its earlier analyses to peg the savings from reductions in defensive medicine due to Hatch's proposed tort reform at $11 billion a year:

Because of mixed evidence about whether tort reform affects the utilization of health care services, past analyses by CBO have focused on the impact of tort reform on premiums for malpractice insurance. However, more recent research has provided additional evidence to suggest that lowering the cost of medical malpractice tends to reduce the use of health care services.

CBO now estimates that implementing a typical package of tort reform proposals nationwide would reduce total U.S. health care spending by about 0.5 percent (about $11 billion in 2009). That figure is the sum of a direct reduction in spending of 0.2 percent from lower medical liability premiums and an additional indirect reduction of 0.3 percent from slightly less utilization of health care services.

A billion here and a billion there and pretty soon, as the saying goes, you're talking about real money. Just not anything that resembles the jaw-dropping figures routinely spouted by Republican leaders. As Tom Baker concluded regarding the malpractice myths propagated by GOP sound bites on tort reform:

"It's a red herring. It's become a talking point for those who want to obstruct change. But [tort reform] doesn't accomplish the goal of bringing down costs."

(This piece also appears at Perrspectives.)

About Jon Perr

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