How Both the Bush and Kerry Plans for Medical Malpractice Reform Override the Rights of Patients--and the Interests of the States

During both the Vice Presidential and Presidential debates last week, the candidates each argued that their respective tickets had the better plan for addressing the high cost of medical malpractice insurance.

The Bush-Cheney approach would cap damages and attorneys' fees in medical malpractice lawsuits. The Kerry-Edwards plan would require that a lawyer intending to bring a medical malpractice suit first receive approval of the grievance from a "qualified medical specialist." It would also bar attorneys who have filed three frivolous lawsuits from suing again for ten years.

Whether our health care system currently faces a medical malpractice crisis is open to question. As Senator Kerry's own campaign website notes, and as he said during Friday's debate, malpractice costs account for less than two percent of annual health care spending. Moreover, his website goes on to explain, the rate of malpractice filings has actually fallen over the last decade --suggesting that the main problems in our health-care system lie elsewhere.

Moreover, to know whether medical malpractice litigation is actually having a deleterious impact on the provision of health care, we need to take account of both the costs and the benefits of such litigation.

There are costs. As Vice-President Cheney noted, fear of lawsuits has led some doctors to abandon specialties (such as high-risk obstetrics) that frequently give rise to expensive litigation. And as President Bush added, the possibility of suit induces some doctors to practice "defensive medicine," which in turn adds to the overall cost of care.

But medical malpractice litigation also has benefits. Lawsuits direct compensation to deserving victims who would otherwise receive none. In addition, the possibility of suit can create incentives for doctors to exercise caution where they might otherwise be lax.

Indeed, a Harvard School of Public Health Study based on extensive hospital data from New York in 1984 showed that only one in eight victims of medical malpractice ever even contacts a lawyer, and only one in sixteen ever receives any compensation. Assuming those numbers remain basically accurate twenty years later, the study suggests that the real problem is not too much medical malpractice litigation but too little.

However one weighs the costs and benefits of medical malpractice litigation, we should all be able to agree on our goal: We would ideally like to compensate patients who suffer as a result of incompetent medical treatment, while at the same time minimizing the exposure of competent health care providers to litigation and insurance costs.

Unfortunately, neither the current Republican nor Democratic position promises to meet both these goals. Upon close inspection, it becomes clear that both the Bush-Cheney approach and the Kerry-Edwards approach would deny recovery to a substantial number of plaintiffs with meritorious claims. And both plans would work very serious intrusions into areas of law that have traditionally been left to the states, rather than the federal government.

The Pitfalls of the Bush-Cheney Plan

As Vice President Cheney detailed in a speech that is available on President Bush's campaign website, the centerpiece of the Bush-Cheney medical malpractice reform package is a cap of $250,000 on so-called "non-economic" damages.

What are "non-economic" damages? First, it's necessary to define "economic damages." In a medical malpractice lawsuit, such damages typically have two primary components: First, medical bills resulting from the harm done by the health care provider's error; and second, lost wages resulting from the patient's (permanent or temporary) inability to engage in the sorts of gainful activity in which she would have engaged were it not for the malpractice.

In contrast, "non-economic" damages refer to compensation for pain and suffering, as well as punitive damages. Let's put aside the issue of punitive damages--which are rare in medical malpractice cases anyway, as the legal standard in most states requires "willfulness." Let's ask simply: Is the proposed $250,000 cap on recovery for pain and suffering appropriate?

We can answer that question by examining the two principal aims of the tort system: compensating victims and deterring undesirable conduct by prospective defendants.

With respect to both of these aims, a well-functioning tort system would reach the same result: Defendants should pay an amount equal to the harm they cause to plaintiffs. By definition, plaintiffs should be compensated by an amount equal to the harm they suffered.

And our deterrence goal, too, counsels that damages should equal actual harm. Defendants acting in the shadow of the law should have an incentive to take just those measures, and only those measures, that are cost-justified. In other words, we want doctors to be cautious--but not so cautious that they end up practicing defensive medicine, by, for example, ordering unnecessary tests to cover themselves in case of suit.

Is $250,000 enough money to compensate victims of medical malpractice for their pain and suffering in all cases? It is hard to see how it could be.

Imagine a frightful medical error that results in permanent brain damage or permanent loss of limbs. Even if you were assured that you would have your medical bills covered and would receive payment equal to what you would have earned in the absence of the medical error, would you voluntarily accept such a condition for a payment of $250,000? Of course not.

Perhaps that's not the right question, however. According to some economists, the better measure of damages is not how much money people would demand to suffer brain damage or lose a limb, but how much they in fact demand to accept increased exposure to the risk of such a calamity.

We can get a rough measure of that figure by looking at how unions trade off salary against worker safety measures. (The union context is a useful one because workers have bargaining power, and thus do not simply accept whatever terms the employer offers.) Suppose, for instance, that workers are willing to forego no more than a dollar of annual income to eliminate a one percent annual risk of some kind of accident. Then that suggests that they value the harm done by this kind of accident at a hundred dollars.

So are there harms that workers value at over $250,000? You bet. Estimates vary depending on the circumstances, but the data overwhelmingly reveal that workers value their own lives (in statistical terms) in the millions of dollars. And likewise, workers will pay the equivalent of well over $250,000 to avoid not only death but a variety of other serious misfortunes.

Thus, capping non-economic damages at $250,000, as Bush and Cheney propose, will result in under-deterrence of medical malpractice and under-compensation of victims.

The Pitfalls of the Kerry-Edwards Plan

If the Bush-Cheney proposal will result in under-compensation and under-deterrence, the Kerry-Edwards proposal will result in the complete evisceration of some meritorious medical malpractice lawsuits. To see how and why, consider a not-all-that-unusual hypothetical case.

Suppose that a surgeon performs a procedure for which the patient must be placed under general anesthesia. The procedure and the anesthesia carry low but non-zero risks of death. Let us suppose, also, that even if the surgeon and the anesthesiologist perform their jobs perfectly, one in a hundred patients will die during surgery simply from bad luck.

Now let's assume that a patient dies, and his widow thinks that either the surgeon or the anesthesiologist is responsible. Admittedly, the surgeon's own post-operative notes indicate that the complications leading to the patient's death arose spontaneously. However, the widow hears from a friend who works at the hospital that an unusually large number of the patients of this surgical team have died lately. What can she do?

Under the rules of procedure in the federal courts and in many state courts, the widow and her lawyer would be permitted to file suit against the surgeon, the anesthesiologist, and the hospital, so long as before filing they undertake "an inquiry" that is "reasonable under the circumstances."

What is such an inquiry? Having examined the surgeon's self-serving notes, the widow might try to get more specific information from her friend. But the friend might only have a general impression based on rumors and would, in any event, be barred by patient privacy laws from disclosing information about other cases. Likewise, other health professionals who assisted in the operation might be unwilling to speak, or even be barred from speaking, to the widow and her attorney. If the widow and her attorney encounter such roadblocks, they would likely be considered to have performed their reasonable inquiry, and the case could be filed.

If that rule sounds unduly permissive, it's important to bear in mind that shortly after the filing of the lawsuit, the widow's lawyer, as well as lawyers for the defendants, will be conducting discovery--taking depositions, examining records, and so forth--to determine whether the death resulted from negligence, or was simply one of the one-in-a-hundred cases of bad luck. If the plaintiffs' side cannot come up with evidence of negligence, the case will be dismissed before trial.

Now note how the Kerry-Edwards proposal would change the equation. Under their approach, a lawyer must prove the merit of the case to a "qualified medical specialist" before it is filed, and therefore before there has been any opportunity to conduct the sort of investigation that the discovery rules envisage occurring after the filing of a lawsuit.

Thus, for example, suppose an assisting nurse would be prepared to say under oath that the surgeon was drunk when he performed the operation. If the nurse is unwilling to cooperate except under the sort of court order that can generally only be issued once a lawsuit is filed, then there is no way that the plaintiff can even get that testimony into court in the first place.

Accordingly, it is reasonably certain that the Kerry-Edwards plan would keep out of court some substantial number of suits that would be deemed meritorious, if only the plaintiffs and their lawyers were given the opportunity to utilize the broad discovery tools the law currently affords.

How Both Plans Intrude on the States: Another Drawback of Each

Put another way, the Bush-Cheney plan unfairly limits recovery in some cases and the Kerry-Edwards plan unfairly keeps some cases out of court. But to say this is not necessarily to say that either plan is, on balance, undesirable. It may well turn out that when one accounts for the benefits of these proposals, one, the other, or both are actually defensible.

After all, there may be no perfect solution to the problem of medical malpractice, in which case we will be faced with a tradeoff between fully compensating victims and not over-deterring doctors. Whether the Bush-Cheney proposal or the Kerry-Edwards proposal strikes the right balance is thus a matter of judgment.

But there is the remaining question of whose judgment. Medical malpractice law is almost entirely state law. What business does the federal government have enacting laws that displace the decisions of state courts and legislatures in these matters?

In an earlier column, I explained why there are real doubts about whether Congress even has the constitutional power to enact laws governing medical malpractice in the first place. To be sure, I suspect the Supreme Court would probably uphold such laws as falling within Congressional authority to regulate interstate commerce. But that is not a certainty--and the answer will become clearer after the Justices decide a pending case, Ashcroft v. Raich, posing the question whether a federal drug law can constitutionally be applied to marijuana that was grown in California and used in California for medical purposes.

However, even assuming that the courts would sustain, as within constitutional limits, federal proposals to limit medical malpractice litigation, that doesn't mean such proposals are warranted as a matter of policy. To justify them, Congress--and the Presidential and Vice Presidential candidates--ought to be able to articulate some reason why federal legislation, in particular, is needed.

Both Campaigns Fail to Convincingly Address the Federalism Issue

None of the four Presidential or Vice Presidential candidates even mentioned in last week's debates that their respective medical malpractice insurance reforms would dramatically shift power from the states to the federal government.

What about the official campaign materials? The Kerry website does not address the federalism issue. Vice President Cheney did address it in his speech promoting malpractice reform, but he did so in wholly unconvincing terms.

Noting that medical malpractice premiums are higher in Ohio (where he was speaking) than in Indiana, Cheney stated that "medical litigation abuse is a national problem, and it needs a national solution." But saying so doesn't make it so.

Is there some reason why the states--many of which have adopted malpractice reforms of exactly the sort that Bush and Cheney promote--are incapable of acting individually in this context? And if there is not, why should the federal government displace the different balances that different states have struck between over- and under-deterrence of defendants, or over- and under-compensation for plaintiffs?

One can perhaps forgive the Kerry-Edwards ticket for failing to address the federalism issue. Over roughly the last seventy years, Democrats have tended to be less solicitous of states' rights than Republicans.

Bush and Cheney don't have that excuse. Their medical malpractice reform proposal is a large intrusion into an area of traditional state independence. Even if it were sound on policy grounds, the principles of limited national government to which the Republican Party still pays lip service would still demand a justification for national action.

But don't expect one from either campaign, at least not until after the election.