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Medical Malpractice -- An Alternative manner of Reform

by John F. Tamburo, Editor in Chief, Publisher
Originally Posted: 10/20/2004

Here’s an idea to make healthcare more affordable.  Normally, I am not one to suggest that the government ought to involve itself more than it does now.  However, I think that there is a way to make things better -- to alleviate chaos – which is indeed one of the government’s core tasks.

George W. Bush is indeed right when he states that malpractice suits and the consequent outrageous hikes insurance premiums are a primary cause of the soaring cost of health care.  Why?  While it is true that malpractice suits only constitute 1-2% of the cost of healthcare in and of themselves, our President is right when he states that doctors practice defensive medicine, ordering unnecessary tests and hyper-documenting all patient contact.  This doubtlessly raises the cost to patients. 

Moreover, as doctors leave specialties, such as Obstetrics and Neurosurgery, over gigantic insurance premiums that portend to bankrupt them, the remaining practitioners are in short supply.  They then raise their prices to cover their premiums and to keep demand at a level where they can practice competently.

The problem is the jury trial system.  The seventh amendment guarantees the right to a jury trial if the value in controversy exceeds twenty dollars.  The trouble is that trial lawyers are experts at pulling on the heartstrings of the jurors, and they win awards in the tens of millions of dollars.  Under normal contingent fee rules, the attorney usually gets 1/3 of that money.  Therefore, if the plaintiff wins $30 million, the plaintiff’s attorney gets ten million dollars.  That is a powerful motivation to explore every possible avenue of recovery. 

Attorneys therefore file “test cases” where they are seeking to establish a new cause of action to get in front of a jury, where they can cash in on a huge payday.  If the attorney gets tossed out of court, it’s only a couple dozen hours of work and a filing fee; no big deal.  If the attorney prevails and gets to trial, the payday ensues.  These actions do virtually nothing to constrain abuse in the healthcare industry.  Health care workers and hospitals end up paying billions in premiums under onerous insurance terms and conditions. 

The insurers are not to blame for this; they have to pay to defend the practitioner or hospital, even for “test cases” where the action is tossed out of court.  If that costs the insurer $50,000 in legal fees, that is six months’ malpractice premium for the average general practitioner.  “High-Risk” specialty premiums can exceed $500,000 per year.  Combine that with office salaries to maintain documentation of  every eye-blink and sniffle, health insurance companies that demand fee concessions to put the doctor on a PPO “list,” and office expenses, and it’s no wonder that it can cost $300 to see your OB/Gyn for a simple office visit.

Malpractice litigation needs to be reformed.  I suggest that a nationwide arbitration system be created.  Every doctor would pay $20-50,000 per year as a license fee (hospitals would pay $300-500,000) and would no longer need to carry malpractice insurance.  All malpractice cases would be required to arbitrate before the board.  Each board would be comprised of a doctor, an attorney, an accountant and two lay persons of good character.

The sides would present their evidence within 90 days of filing.  The board would then vote if there was a violation of the standard of care.  If there was, then the accountant would calculate a fair amount to compensate the patient, and the board would ratify it.  120 days from beginning to end.  A patient would not be required to have an attorney to appear before the board.  Attorney fees would be limited to a reasonable hourly rate.

If compensation was awarded, the board would pay it from the doctor/hospital license fees.  If the board determines that the doctor acted recklessly or intentionally, the board can suspend or revoke the doctor’s license, or order the doctor to reimburse the patient.  If a patient or practitioner did not like the result, he or she could ask to appeal to federal district court, but the court would only judge if there was an abuse of discretion and reverse the judgment.  Appellate review past that would be by leave only.

Whether this meets with Seventh Amendment muster is a good question.  However, The Federal Arbitration Act in Title 9 of the U.S. Code has been found to be constitutional. Many state courts have mandatory arbitration for certain classes of cases. Moreover, this system is in line with the right to petition for redress contained in the First Amendment.

What this does is eliminate the passion of juries who act on sympathy instead of reason, while allowing a person the right to pursue malpractice actions.  It also removes the financial incentive for attorneys to try to “cash in” on legally novel but scientifically suspect theories of liability.  With that worry removed, doctors can reduce defensive testing and onerous recordkeeping.  Finally, it drastically reduces the amount of money paid by doctors and hospitals for insurance.

In this case, we retain the patient’s right to seek redress for damages, streamline and speed the process, and also balance it with the medical practitioner’s need to practice medicine without being terrified of litigation for every pill, diagnosis or inadvertent mistake.  I therefore propose this solution.