Wednesday, August 19, 2009

UAB Report: Tort Reform Provides No Savings

I was recently watching CNBC and they were debating health care costs. Former Tennessee Senator Bill Frist was on and was asked about tort reform as part of the health care debate. He remarked that what he considered it an issue, it was not a significant piece of the solution. I was shocked by this remark.

For years, this has been the battle cry of groups like Citizens for Lawsuit Abuse. Hatched in Texas by Karl Rove and others and perfected in Alabama and Mississippi, these groups convinced virtually everyone that "tort hells" and "greedy trial lawyers" were the cause virtually everything evil in society. All lawsuits are frivolous, everyone who sues wants something for nothing, and juries of average people (who can determine whether someone lives or dies in a criminal context) are too stupid to determine whether or not corporations engaged in fraudulent conduct and if so, the level to which they should be punished.

Guess What----It Worked---But for Who??????????????

The success of this endeavor, financed by insurance companies, tobacco and large corporations has been extremely successful. Many states have passed tort reform statutes. Juries view all plaintiffs with distrust, and are much less willing to award damages---"for fear that my insurance rates will go up" as many interviewed jurors will openly tell you. A trial judge recently told me that about 50% of rear end accident cases tried in his court result in a verdict for the defendant. That's right, 50% of the time, when someone admits the were not paying attention and hit someone from behind, the jury refuses to hold them responsible for their conduct. While at a restaurant recently, I spoke with a lawyer who previously worked for a large insurance company trying car wreck cases. He said that he was fired by one insurance company because he recommended that they pay twice the medical bills.

One must then ask the question, who benefits when this occurs. I would submit that it is insurance companies who benefit. See also, "Ironic Twist of Fate--Tort Reform Champion loses his own Medical Malpractice case."

On to the subject of medical malpractice. Frequently, I talk to my friends who are physicians about medical malpractice. Few have been sued. All know of situations where they think physicians should have been sued, and all are scared to death that they will get sued, lose their practice, their homes, and everything they have worked for so long to accumulate.

I ask them where they get their information from and of course, it is their insurance company. They know about the huge verdict here and there, but not the ultimate outcome. They know their rates are going up and assume it is because of huge settlements and verdicts. They never compare the premiums written to the verdicts in Alabama. Their response to that inquiry is that the insurance companies settle out of court. They seem unaware that largest insurance carrier for doctors in Alabama tries virtually all case filed, so that hypothesis is invalid.

I ask them if they have ever driven by the home of the recently retired CEO of the insurance company which writes most doctors in the state. I ask if they ever considered how it is that he could afford a house that published reports indicate the property taxes alone are in excess of $100,000 per year?

I guess I digressed from where I started, which was with the reading of two articles I found ver interesting. One from the Kentucky Lexington Herald-Leader, "Tort Reform does not cut health costs" and the second from from the New Yorker, authored by Ault Gawande titled "The Cost Conundrum, What a Texas town can teach us about health care" .

According to the Lexington Herald-Leader, States that enacted limits on malpractice claims have seen no cost savings. To the contrary, Texas capped malpractice damages in 2003 only to experience a steep rise in health insurance premiums and medical costs.

Boston surgeon Ault Gawande wrote in The New Yorker about his visit to Texas (see full New Yorker article hyperlinked above). While at dinner with several physicians, he asked about lawsuits. He was told that they had dropped "practically to zero." Well, he wondered, what happened to the claim that doctors were practicing defensive medicine---the basis for tort reform. He learned that doctors have an incentive to order lots of tests---they profit from them!!!!!!!!

These results are not unique.

In 2008, researchers at the University of Alabama at Birmingham published reports of their study which surveyed 27 states with non-economic caps. The principle findings state:
"Using a variety of empirical specifications, there was no statistically significant evidence that noneconomic damage caps exerted any meaningful influence on the cost of employer-sponsored health insurance."
The study concluded:
"The findings suggest that tort reforms have not translated into insurance savings."

Unfortunately, I think too many to may physicians have been misled by the insurance industry that the evil lurking is a lawyer who trying to take everything they have work tirelessly to attain. Perhaps if they formed their own mutual company and insured their own risk, they could see what the real cost of malpractice coverage.