Lawsuits and health costs

Debate swirls on the effects of malpractice awards

Staff WriterSeptember 27, 2009 

  • The idea of restricting medical malpractice lawsuits has resurfaced in discussions about reforming the nation's health-care system. Here are some measures frequently supported:

    Capping noneconomic damages: These awards cover pain and suffering, plus the loss of normal bonds between husband and wives, or parents and children. In some states, notably California and Texas, such damages are limited to $250,000. Juries can still award large sums to cover the loss of income or to pay future medical bills.

    Pros: With less to gain, patients would file fewer lawsuits. Doctors and their insurers would see immediate savings in malpractice premiums, which could be passed on to patients, and doctors would feel less compelled to prescribe unnecessary treatments as a hedge.

    Cons: Retired people, children and stay-at-home parents who don't have incomes would have trouble getting lawyers to take their cases. And while difficult to quantify, patient advocates say, the price of life and limb cannot be arbitrarily capped.

    Limiting attorney fees: Plaintiff lawyers often take malpractice cases on contingency: They don't get paid unless they win. But when they win, they can take as much as 40 percent of verdicts and settlements.

    Pros: Cutting these fees would put more money in the hands of patients who have suffered injuries and would serve as a disincentive for lawyers to file frivolous claims.

    Cons: Plaintiffs lose most of the time, and it's their lawyers who are out the upfront costs for experts and other expenses. The only way to offset these losses is to take a larger share of winnings. What's more, defense lawyers would not have their income similarly limited, because they're paid by the doctor's insurance company.

    Establishing review panels: Before lawsuits can proceed, a panel of perhaps three doctors would review the claims for merit.

    Pros: Experts familiar with the kind of care that is generally practiced in a community could weed out frivolous lawsuits.

    Cons: Before a lawsuit can be filed in North Carolina, patients must enlist a medical expert willing to testify that a fellow doctor messed up. That hurdle already curbs unworthy cases.

The issue had slipped into the background noise of health-care reform, but calls to curb medical malpractice lawsuits are once again rising.

And although a government agency notes scant evidence that reducing lawsuits against doctors would save much money in the nation's $2.1 trillion annual tab for health care, the idea is fervently supported by many doctors and lawmakers who cite frivolous lawsuits as a pervasive problem.

Among their arguments is that runaway legal claims drive up the cost of malpractice insurance policies and compel doctors to order unnecessary tests and treatments as a hedge against being sued.

"It causes defensive medicine," said Dr. George Sheldon, chairman emeritus of surgery at the UNC-Chapel Hill School of Medicine. "That's not a positive in the system, and it ought to get fixed."

Lawmakers in Washington are now discussing fixes as they hash through health-care reform bills. President Barack Obama, in his recent speech on the issue, said he would consider some changes to the tort system and would fund projects to test approaches that reduce lawsuits.

But lawsuits are already declining in North Carolina and in much of the rest of the nation.

Last year, 438 new cases were filed in the state, the lowest number in at least 10 years, representing 0.16 percent of total civil filings, according to data collected by the state's trial attorneys, N.C. Advocates for Justice.

And doctors win the majority of jury trials -- more than 75 percent of them.

In 10 years, patients have won 51 verdicts from North Carolina juries. When patients win, payments often barely cover the considerable legal expenses incurred, with a median award of about $375,000, although several cases have resulted in multimillion-dollar verdicts.

Other cases settle out of court. Statistics from the N.C. Medical Board show 1,355 payments were made to patients between 2003 and 2007, the latest period available; the average payout was $315,650.

"The fact is, we're a conservative state," said Burton Craige, a patient advocate and lawyer in Raleigh with Patterson Harkavy. "We have conservative juries that are loyal to their local health care providers. Anyone who refers to this as a lottery -- it's a very, very low rate of payout, and with considerable risk of loss."

Old issue returns

Tweaking the rules for medical malpractice lawsuits was a huge issue six years ago in North Carolina, when malpractice premiums spiked to levels that forced some doctors to quit or scale back their practices.

A mass of doctors in white coats assembled at the state legislature in April 2003, demanding caps on certain damage awards and more scrutiny by experts into the alleged harms suffered by patients.

But tort reform efforts failed at both the state and national levels, and the issue slipped out of public view.

Since then, lawsuit activity began declining, and the rates doctors paid for malpractice insurance stabilized.

"It's no secret that medical malpractice insurers are doing great these last few years," said Kevin Conley, chief actuary with the N.C. Department of Insurance. "Nobody's making claims, compared to, say, 10 years ago."

He said the medical malpractice business is notorious for booms and busts, because claims against doctors are unpredictable and take longer to resolve than car crash cases or property damage.

Currently, Conley said, the state's largest carrier charges its doctors on average about $15,000 a year for coverage. Neurosurgeons and others in high-risk specialties, he said, pay far more.

Conley said that in recent years, insurers have been cutting the price from posted rates "like Walmart discounts socks."

"They have not made a rate filing with us in four years, and the reason is that we'd squeeze them so hard they would end up with a substantial [rate] decrease," he said.

But even as the insurance market has settled down, the issue of tort reform has remained a priority among many doctors, who contend that patients seeking a "jackpot jury award" too often sue over bad outcomes, even though no negligence or errors occurred.

And that's expensive, not only for the doctors who are sued, they argue, but also for the nation's overall health-care bill.

A 2002 calculation by the U.S. Department of Health and Human Services estimated that capping noneconomic damages -- awards that cover difficult-to-measure concepts such as pain and suffering -- could save up to $44 billion a year because doctors would no longer order unnecessary tests, scans and treatments to guard against potential lawsuits.

But those findings have long been questioned, and in 2006, the nonpartisan Congressional Budget Office concluded that the evidence of cost savings is inconclusive.

"The Congressional Budget Office has examined the issue by looking at the experience of states that implemented limits on torts and has not found sufficient evidence to conclude that practicing defensive medicine has a significant effect on health-care spending," the CBO reiterated in a budget report last year.

Doctors stand to gain

The reality is that doctors have a host of different motivations as they manage care. Worried patients frequently demand every available scan or treatment, particularly if insurance helps cover the cost.

And doctors themselves often have financial incentives to order tests and procedures. An article published earlier this month in The New England Journal of Medicine suggests that unnecessary care may account for as much as 30 percent of health-care spending. And while the author cited defensive medicine as one of the culprits driving overuse, he said the main problem lies in "the perverse incentives built into the health-care system.

"Physician remuneration depends on the volume of patients seen, particularly on the number and intensity of the procedures performed," wrote Dr. Robert A. Levine, a Connecticut neurologist. "The need for these services is determined by the very physicians who then arrange for or perform the procedures.

"Even if all physicians were highly ethical and ordered only tests and treatments they deemed truly important, it would take saints not to have their judgment skewed in favor of decisions that will provide them with financial rewards."

Lawyers who represent patients question the very notion that lawsuits prompt unnecessary care. Clifford Britt, a lawyer with Comerford & Britt in Winston-Salem who recently won a $10.4 million jury verdict against Wake Forest Baptist Medical Center, said most lawsuits hinge on medical tests that doctors misread, miscommunicated or ignored, not tests they failed to order.

"It's a faulty argument," Britt said.

No lottery jackpots

Britt and other plaintiff attorneys said it's also unfair to characterize medical malpractice lawsuits as potential lottery jackpots -- a particularly offensive characterization when patients have suffered serious injuries or death.

In the $10.4 million verdict Britt won against Wake Forest Baptist, the patient was Kaleb Davis, now 17, who suffered brain damage and physical disabilities after he was treated for a severely mangled arm from a falling tree limb in 2003.

According to testimony, he was given a blood thinner out of fear that a clot would develop. Instead, bleeding erupted on his spinal cord, forcing a surgery to remove bones in the spine. He was put in a halo device to keep his head from moving.

One of four screws that secured the halo was tightened too far, grinding nearly an inch through his skull and into his brain. He suffered bleeding, stroke and permanent impairments.

The teenager will require untold additional surgeries and therapy, and will likely not live independently.

"Kaleb Davis does not feel like he won the lottery," Britt said.

Nor was the award a windfall. The case took four years to reach trial, and cost at least $360,000 to pay experts and other expenses just on Davis' side.

In North Carolina, patients cannot pursue a malpractice claim without first lining up another doctor to vouch that care was somehow botched. These experts must be familiar with care in North Carolina, and restrict opinions to their area of specialty. Some cases require several experts -- all of whom are expensive.

Jason Newton, a lawyer with Yates, McLamb & Weyher in Raleigh who specializes in defending doctors and hospitals, said defense costs are also significant and require serious attention regardless of the merits of the case.

And although doctors usually prevail, he said the toll of a lawsuit is high, even in victory.

"Obviously, it is emotionally draining for any provider to be accused of making a mistake or providing less than good care," Newton said. "Defendants may have to live with the experience for several years" before prevailing with a verdict or dismissal to clear their names.

As a result, he said, no one wins: "There is the threat or fear of being sued that may create a culture of mistrust between patients and doctors."

But plaintiff advocates said restricting the rights of patients to sue would neither build trust nor improve the health-care system.

"Physicians and hospitals have an incentive to order procedures and profit from them, and most patients are shielded from the impact of those costs by insurance and Medicare," said Craige, the Raleigh lawyer and patient advocate. "Fear of lawsuits is a convenient boogeyman to avoid accountability for people who are actually making these decisions."

savery@newsobserver.com or 919-829-4882

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