Five Medical Malpractice Myths

Medical malpractice reform is a political football in a game that serves no one well. Not patients, not their legal representatives, not medical professionals, not insurance interests.

OK, we’ve said that before, but we’ll keep saying it as long as the flat-earthers press their misguided “reforms.” And here are some new facts:

A recent article by David A. Hyman, a doctor and a lawyer, and Charles Silver, a lawyer, in Chest Journal, (the publication of the American College of Chest Surgeons) identifies five myths of medical malpractice that persist in doctor circles. Hyman and Silver want to set the record straight.

Myth No. 1: Malpractice crises are caused by spikes in medical malpractice lawsuits.

This bogus belief spreads when juries give large awards to patients with claims that sound, in the media accounts, questionable or frivolous. But research indicates that such stories of “runaway” jury verdicts, when they’re not completely apocryphal, do not represent the norm. And rarely are they paid in full.

“Because the overwhelming majority of payments to plaintiffs are the result of voluntary settlements,” the writers point out, “one must study closed claims (rather than jury verdicts) to get a full picture of what is going on.”

Closed claims databases show that both the frequency of malpractice claims and the payments per claim were either stable or declining at the beginning of this century. The writers conducted a study using the National Practitioner Databank. They found that the frequency of paid medical malpractice claims per physician has been dropping steadily since 1992, and is now less than half the level it was that year.

The decline is largest in states that recently capped damages awarded because of medical malpractice, but there are large declines in states with no damage caps as well.

An earlier study using the National Practitioner Databank data found that average payments grew by about half from 1991 to 2004, roughly in line with increases in health-care spending.

“The finding that the latest malpractice crisis was not caused by spikes in malpractice claims or payouts should not be surprising,” say Hyman and Silver. “Although hot spots can occur, the liability system primarily responds to (and lags) the frequency of serious medical injuries.

Because the frequency of serious medical injuries changes slowly, the litigation rate should not be prone to dramatic spikes in claiming.”

Even the big payouts in the rare, headline-grabbing jury verdicts often are slashed by judges. And more than 9 in 10 cases are resolved, and the overwhelming majority of payouts are made as a result of voluntary settlement.

Myth No. 2: The tort system delivers “jackpot justice.”

This charge means, basically, that the system doles out compensation randomly. Uninjured patients take home millions, and people who suffer grievously receive little or nothing at all.

This seems so especially if you’re focusing on patients who experience bad outcomes and can’t tell whether they’re victims of negligent treatment or bad luck. (See our blog “The Difference Between Medical Negligence and Complication.” ) Many patients who received appropriate care file claims.

But the larger problem, say the writers, “is that an enormous fraction of patients who are harmed by medical negligence either make no effort to recover damages or cannot find lawyers willing to take their cases. (See our blog, “How Tort Reform Continues to Victimize the Victims”.) These patients, who are entitled to compensation, never initiate claims. “So the liability system is simultaneously beset by overclaiming and underclaiming.”

If you focus on people who initiate claims, the liability system is pretty good at separating the worthy from the unworthy. Patients who were treated negligently recover damages far more often than patients who weren’t. And except for patients who die, payments increase with injury severity. “Unfortunately,” the writers say, “most patients are undercompensated, and those with the most severe injuries suffer the biggest gap between provable injuries and the amounts they recover.”

Objective data for this comes from the Texas Department of Insurance. Texas adopted tort reform in 2003. Before then, in a state with a population of almost 25 million, there were only 7,650 malpractice claims per year. After tort reform, the number of claims declined to 5,300 per year.

Both pre-reform and post-reform, more than 8 in 10 claims closed without payment. When there was a payment, it was almost always the result of a voluntary settlement-that is, trials were rare.

The average payout was $609,000 during the pre-reform period and $419,000 post-reform. Jury verdicts were substantially higher, but they typically got cut a lot before they were paid. And physicians rarely paid anything out of pocket.

Here’s how the severity of injury is quantified. Data from the Illinois Department of Insurance show that from 2005 to 2008, the average payout was $626,827, but the amount paid wasn’t as much for less-severe injuries. Patients got the most money only if they suffered at least significant permanent injury. Their average award was $1.25 million.

Myth No. 3: Physicians are one malpractice verdict away from bankruptcy.

Physicians’ fear that a malpractice verdict will wipe out their savings is proved unfounded, the writers say, when you consider that jury trials are uncommon and plaintiff victories even less common. Most malpractice cases are settled or dismissed; only about 2 in 100 claims go to trial, where providers win about 3 in 4 cases.

If you compare actual payments to jury awards, “many patients who win turn out to be losers as well,” the writers say. Awards often fail to cover patients’ actual losses. As we said, you hear about huge verdicts because they are so unusual.

“Any verdict, blockbuster or otherwise, that exceeds the limits of a provider’s insurance coverage is quite unlikely to be paid in full,” the writers note. In Texas, the larger the verdict, the more likely it was to be reduced because policy limits served as a functional cap on patients’ recoveries.

And you might be surprised to learn that when payments above the policy limits were made, whether the case had gone to trial or was settled, the money almost always came from insurers. Out-of-pocket payments by physicians were extraordinarily rare. “Most physicians have effectively no personal exposure on malpractice claims (other than the obvious and unavoidable side effects of litigation, e.g., the emotional and time-related costs of being deposed),” the writers say.

Generally, plaintiffs’ lawyers don’t go after physicians’ personal assets, as a study once documented. In other words, it’s not about vengeance; it’s about justice.

“The only physicians who should worry about personal exposure are those who grossly underinsure,” the writers conclude, “and even they should not worry too much.”

Myth No. 4: Physicians move to states that adopt malpractice damages caps.

“If physicians relocate because of liability risk,” the writers note, “damages caps are an obvious strategy for attracting more physicians, particularly in lawsuit-prone specialties.”

This strategy works only if some states do not have caps. But plenty of states lack caps, and researchers have found that damages caps may draw a small number of physicians especially to rural areas or particular specialties. But there’s not much evidence to suggest increases in statewide physician counts.

Before Texas capped damages in 2003, proponents of tort reform claimed that physicians were deserting the state in droves. After caps were imposed, proponents claimed that there had been a dramatic increase in physicians moving to Texas because of the improved liability climate. But Hyman and Silver’s study found no evidence to support either claim. Hyman and Silver write:

“Physician supply was not measurably stunted prior to reform, and it did not measurably improve after reform, whether one focused on all patient-care physicians in Texas, on high-malpractice-risk specialties or on rural physicians. Thus, although damages caps may play a small role in attracting and keeping physicians practicing in rural areas and in high-risk specialties, the evidence is mixed, and some studies have found no effect.”

Myth No. 5: Tort reform will lower health-care spending dramatically.

The writers ask how much the malpractice system costs, and how much tort reform will reduce the cost of the malpractice system, including its effect on health-care spending.

Direct costs include malpractice awards and settlements and all costs associated with defending against such claims, including the administrative costs of medical malpractice insurers. Indirect costs often are referred to as “defensive medicine,” which is when doctors overprescribe or overtest to avoid the claim of having been negligent-it’s the cover-your-hiney strategy.

“Because tort reforms make lawsuits less likely and less expensive, they may reduce defensive medicine,” the writers suggest, “and thereby reduce health-care spending.” The direct costs of the malpractice system are only about 2% of health-care spending. Still, proponents claim that tort reform can reduce indirect costs by $100 billion to $650 billion per year.

Uh…no. One study of the impact of tort reforms on health-care spending found that damages caps and other reforms that limited liability directly reduced post-treatment medical spending by 4% – 5%.

A Congressional Budget Office review “found no evidence that restrictions on tort liability reduce medical spending.” A follow-up Congressional Budget Office study estimated that a cap on noneconomic damages would reduce Medicare spending by a statistically insignificant 1.6%.

Several other studies showed similarly modest reductions.

Hyman and Silver’s analysis of Texas’ damages caps showed in a dramatic decline in claim frequency and payout per claim, reducing overall payouts by about 75%. But this dramatic change in the malpractice environment did not result in significant changes in health-care spending levels. After reforms were enacted, they even found evidence of increased physician spending in counties where medical malpractice risk was high. They concluded that there was no evidence that Texas’s tort reforms bent the cost curve downward.

In summary, although “tort reform” doesn’t do much for Hyman and Silver, they still acknowledge problems with the medical malpractice system.

For one, it’s slow. “On average,” they say, “it takes about two years from the date of injury to the date a lawsuit is filed and roughly the same amount of time for the case to be settled. But the time period required can be much longer, particularly if minors are involved or if the case goes to trial.

“It is unrealistic to expect the malpractice system to provide much in the way of useful feedback if it takes at least four years to get an answer.”

They also call the malpractice system extremely expensive. The cost of defending paid medical malpractice claims has roughly doubled since 1988. “In part,” they say, “high costs are ‘baked into’ the third-party fault-based process for determining who gets paid by the malpractice can serve as an expert because decreased supply translates into higher prices.”

Also, the malpractice system is perceived by everyone as unpleasant, unjust and/or unfair. “Providers who were not negligent resent being dragged into lawsuits and having their competence questioned. Patients who were injured (whether negligently or not) are usually unable to find out what happened to them unless they find a plaintiffs’ lawyer willing to take their case, and then they must wait several years for the process to be completed.”

But none of the above is an argument for limiting awards. Although damages caps “can dramatically reduce claims frequency, payouts per claim and insurance premiums, they do not make health-care safer, reduce health-care spending, compensate those who are negligently injured or make the liability system work better.

“The best reforms are patient safety initiatives that reduce the frequency and severity of medical mistakes. Ideally, the liability system would encourage providers to adopt patient-protecting innovations. Its effect in that regard is limited, however, partly because tort reforms insulate providers from many of the costs of medical errors.”