Been There, Done That 
'Tort Reform' Has Not Worked

Steven Rosenfeld is a senior editor for TomPaine.com.

America’s doctors have staged a series of dramatic work stoppages in recent weeks to protest rising malpractice insurance rates.

In New Jersey, Florida, West Virginia and elsewhere, they’ve brazenly postponed seeing their patients and made a beeline for the television cameras to deliver an ultimatum: Congress must regulate jury awards, because without such "tort reform" their livelihoods and patients' care are threatened.

"The crisis for our practitioners is basically they either cannot afford or they can’t even get medical liability insurance," said Dr. Charles Hammond, president of the American College of Obstetricians and Gynecologists.

Jury caps haven't lowered or stabilized insurance rates.

"We are totally in favor of a national tort reform," he said, "And I might add, [we also favor] a serious national look at other mechanisms that might improve the issue besides tort reform... [such as] alternative dispute resolution techniques."

But as Congress prepares to respond, tort reform advocates are ignoring an important fact: Doctors and others demanded caps on jury awards when insurance rates spiked in the 1970s and 1980s. Thirty states -- some of the very states where doctors are now calling for federal limits on jury awards -- subsequently adopted jury caps, but the caps haven't lowered or stabilized insurance rates.

According to government studies of the last rate crisis, premiums only fell when the market and economy began to recover in the early 1990s.

"So regardless of whether you believe caps limit the amounts that insurance companies pay out, it’s demonstrable that it doesn’t reduce insurance rates," said Jay Angoff, an attorney who was Missouri’s insurance commissioner from 1993-98.

In the 1980s, when most states adopted their award caps, Angoff said it was assumed that regulating juries would reel in insurance costs. But that’s not what ensued in Missouri, which adopted a $350,000 cap, he said, because insurers never passed along any savings to consumers.

"It stands to reason that tort reform, especially if the cap is real low, has got to reduce the amount that insurance companies will pay out," Angoff said. "But that doesn’t mean the industry will pass it through to the consumer."

Notably, California capped jury awards in 1975, but that didn’t stop premiums from rising. What did hold them down was the aggressive insurance reforms passed by the state in 1988.

California’s remedy was Proposition 103, a ballot measure put forth by consumer activists. It required the industry to justify rate increases and ordered rebates to the public -- including to doctors. Premium costs leveled off only after it took effect.

There is no doubt that insurance rates for everybody, including doctors, have risen dramatically in recent years. The reason why depends on who you ask.

Consumer activists who work on insurance and litigation issues say the crisis is caused by insurance-industry price gouging. They say insurers, who historically earn more money from investing premiums in stocks and bonds, have been hurt by the market downturn. So insurers have raised rates for everybody, including doctors, to recover these losses.

A study by J. Robert Hunter of the Consumer Federation of America suggests this is the case. He studied malpractice premium growth and found it did not track claims paid out by insurers. Instead, Hunter found premiums rose and fell with the economy. In strong economies, when the markets are gaining, insurance rates hold steady. When markets are weak, premiums rise.

"This is the third time in 30 years that we’ve had this crisis," said Joanne Doroshow, executive director of the Center for Justice and Democracy, a consumer and legal rights group. "And inevitably, there are always these frenetic calls for tort reform, because the insurance industry will say, 'Oh, don’t look at us. It’s not our fault that we’re price-gouging. It’s the lawyers and the juries.' When actually that’s not at all what the evidence shows."

"'It’s the lawyers and the juries.'" Actually, that’s not at all what the evidence shows.

The doctors, of course, have the opposite view. They put the blame not on insurers, but on their longtime professional adversaries: the lawyers who sue on behalf of injured patients. And they blame juries who respond to emotional claims by plaintiffs by making multi-million dollar damage awards.

"It’s jackpot justice right now," said Dr. Hammond of the American College of Obstetricians and Gynecologists. "If you look at the number of cases being filed, they are steadily and rapidly increasing. If you look at the size of awards that are given by juries, despite the fact that over 90 percent of the lawsuits never get to court ... the awards that are being granted are going rapidly upward as well."

Doroshow and Hammond present conflicting statistics -- and there are seeds of truth on both sides.

For consumer advocates, it appears to be true that the trend in the number of annual malpractice claims filed, the size and amounts of out-of-court settlements (which account for 95 percent of all claims), and the size of average jury awards have been consistent for years. But from the doctors’ perspective, it’s also true that multi-million dollar verdicts do occur and tilt the system, causing insurers to raise rates and doctors to practice ‘defensive’ medicine.

But beyond the who-is-to-blame debate, there are larger issues at stake: the right to a trial by jury, and the ability of jurors to render justice as they see fit.

Dr. Hammond said his group didn’t just want federal tort reform, but also supported "alternative dispute resolution techniques." This could be mandatory arbitration, or a hearing before an administrative judge, or panel -- any alternative to doctors confronting injured patients before juries.

“I believe there are a number of other dispute resolution mechanisms as well,” he said. “There are the early settlement issues, where the claims would be no-fault; in which some arbitrating panel or judge makes a judgment, and an award is made right there and then. So it’s prompt return of funds to a patient.”

"One way to stop patients who have been injured from suing is to take their rights away."

“I don’t actually buy the benign view of doctors,” said Harvey Rosenfield, author of California’s Proposition 103 and executive director of The Foundation for Taxpayer and Consumer Rights. “Forget about premiums. They don’t want to be sued. They hate lawyers. They hate being sued.”

There is a national crisis in medical malpractice, but it’s not about insurance rates, Rosenfield said. That real crisis is the tens-of-thousands of annual deaths in hospitals each year from medical errors, he said, citing studies by the federal Institute of Health and other academics.

“Doctors and hospitals and HMOs all want their liability limited,” said Doroshow, of the Center for Democracy and Justice. “And one way to certainly stop patients who have been injured from suing is to take their rights away, which is what tort reform does.

"It basically so limits compensation, or provides so many obstacles for people who have been injured, that it’s impossible for them to find the resources to bring a lawsuit.”


Click here to subscribe to our free e-mail dispatch and get the latest on what's new at TomPaine.com before everyone else! You can unsubscribe at any time and we will never distribute your information to any other entity.

Published: Feb 11 2003