News: CJ Exclusives

Politics Shape Prospects for Reform

Medical malpractice issue remains salient in North Carolina, Washington

The best prospect for a solution to North Carolina’s medical liability “crisis” may be to wait and see whether President Bush will be able to force some action out of Congress.

Although national tort reform legislation would no doubt come as a relief to the medical profession, it would also represent a radical departure from federalist principles. States have traditionally had a great deal of discretion over tort laws, including medical liability.

“The issue is whether we are going to become a progressive state — or one that addresses the liability issue after it begins impacting people’s access to health care,” said Bob Seligson, executive director of the North Carolina Medical Society, the state’s largest association of physicians.

Seligson said that his organization forecasts that there will be steady increases in malpractice-insurance premiums for at least the next five years. Although many doctors would like to see a cap placed on “pain and suffering” damages, the physicians are not committed to any one plan, Seligson said. Rather, they will be open to “anything that brings stability, fairness, reason, and predictability back into the system,” he said.

In a few states, legislatures have managed to bring a measure of peace between doctors and lawyers. California passed the nation’s first cap on jury awards for on noneconomic damages — pain and suffering — in 1975. Economic damages, including recovery of medical fees and lost earnings, were not touched.

This $250,000 limit hasn’t been raised in nearly 30 years. Other than some pressure to index the amount to inflation, California continues to enjoy probably the most stable medical liability climate in the country. Its example is almost invariably considered whenever legislators in other states start talking about tort reform.

North Carolina is among 20 states listed by the American Medical Association as being in a medical liability crisis. Of the other 30, all but California and five others are considered to have serious problems. The trend is not good — Massachusetts was moved to the “crisis” column in July, while no states have been downgraded recently.

Despite a few islands of calm like California, the tendency around the country is that doctors and personal injury lawyers have dug into their positions and aren’t about to budge.

The North Carolina debate

Tort reform got an airing in the 2003 and 2004 North Carolina legislative sessions. But in both years the General Assembly went home having accomplished little.

In April 2003, a medical group called Access to Quality Healthcare Coalition staged a demonstration at the State Capitol in Raleigh. While the sight of more than 2,500 doctors in white lab coats was great for the television cameras, it didn’t light a fire under legislators. A Senate bill capping noneconomic damages at $250,000 failed in the House.

This year, the House formed a Blue Ribbon Task Force on Medical Malpractice that held a series of public meetings. However, it adjourned without taking any action. The group did consider drafts of eight tort reform bills. Proposals range from such standbys as a California-style cap on noneconomic damages to less familiar ideas such as offering doctors a tax credit for part of their malpractice premiums.

None of these measures seems to have gotten enough traction that anyone is willing to bet on tort reform having much of a chance when the legislature reconvenes next year.

Politics shapes prospects

Indeed, with the Democrats back in control of both houses after the 2004 election, the prospects for reform dropped a notch. In North Carolina, as around the nation, trial lawyers are heavy donors to the Democratic Party. Democratic lawmakers have returned the favor by maintaining the status quo that allows “jackpot” damage awards and the heavy contingency fees that go along with them.

Even at the national level, the chances for reform look cloudy as long as Republicans are short of a 60-seat supermajority in the Senate. Republicans got a taste of filibuster power this spring as tort reform legislation that had passed the U.S. House was talked to death by Senate Democrats. Considering that there are few remaining moderate Democrats who might cross the aisle on a cloture vote, the next Congress promises more of the same.

This still leaves open the possibility of some creative arm-twisting and judicious expenditure of political capital. Although national security trumped every other issue, Bush throughout his campaign managed to touch on the need for tort reform. Bush occasionally sneaked in a jab at the Democratic vice presidential candidate, North Carolina Sen. John Edwards, who made a fortune off high contingency fees that will likely be a target in any reform proposal.

In his first weekly radio address after his re-election, Bush said: “We must continue to confront the junk and frivolous lawsuits that are driving up the cost of health care and hurting doctors and patients.”

The nature of malpractice lawsuits

So how many of these lawsuits are really junk?

Here’s one thing on which both doctors and lawyers agree. A variety of sources said that perhaps 10 percent of malpractice lawsuits ever got to a jury. Of the rest, about half were settled, and the rest were thrown out of court.

But of those that go the distance, the chances for a jackpot damage award have increased. In North Carolina, the number of settlements greater than $1 million increased from six in 1993 to 19 in 2002.

Despite the fact they’re paying more, doctors appear to have little anger at their insurers. One advantage the reform movement has is that doctors and insurers will present a united front against their presumed enemies, the trial lawyers.

Naturally, there have been attempts to drive a wedge between doctors and insurers. The North Carolina Academy of Trial Lawyers has accused insurers of price gouging and charging doctors to make up for their own bad investment decisions. The lawyers group offers graphs that purport to show that malpractice rates have closely tracked the rise and fall of the stock market.

However, insurers counter that their premiums are based on their forecasts of both the investment markets and claim activity. Premiums aren’t raised just to recoup bad investments or big claims.

Seligson said that it should be obvious that the insurance companies aren’t reaping unfair profits. The trend has been for insurers to get out of medical malpractice, leaving a few specialist firms. Indeed, most of North Carolina’s doctors are insured by only two firms.

The problem of medical specialists

Another argument by trial lawyers that seems more defensible is that malpractice premiums aren’t causing doctors to flee the state. It is true that the number of physicians has grown faster than the population.

But there is also evidence that suggests insurance considerations might be keeping some young doctors out of certain vital but high-risk specialties.

According to the Medical Mutual Insurance Company of North Carolina, which provides malpractice insurance to more than half of the state’s physicians, base premium rates skyrocketed from 1995 to 2003.

Because some specialties are sued more than others, not all doctors pay the same premiums. According to Medical Mutual, emergency-room physicians endured the largest percentage increase from 1995 to 2003. Their rates rose 153 percent to $24,000 a year.

Nearly all doctors agree that OB-GYN specialists are at the greatest risk of being sued. Edwards made a large share of his reputation and fortune by suing doctors who delivered babies afflicted with birth defects such as cerebral palsy. Edwards was able to persuade juries that these conditions were the result of mistakes made during the delivery rather than some unavoidable genetic defect.

The pressure on OB-GYN practitioners shows in their insurance bills. Medical Mutual reports that an OB-GYN specialists can expect to pay $100,000 in annual malpractice premiums, an eight-year increase of 137 percent.

The nightmare scenario painted by the AMA and other physician groups is that medical liability will become so expensive that doctors will relocate their practices to other states that have friendlier laws.

Dr. Conrad Flick, president of the North Carolina Academy of Family Physicians Inc., said that he hasn’t observed many doctors fleeing the state, if for no other reason than they have the same motivation as anyone else to sink roots in a community. Flick works in a private group practice in Raleigh.

However, there is already a considerable attrition occurring in ways that are less obvious than doctors taking down their shingles, Flick said. Liability concerns have led many doctors to drop high-risk specialties from their practices.

“Few family practitioners will deliver babies anymore because of the liability exposure,” Flick said. Rural areas where a few family doctors have to provide all the primary medical care will be hardest hit. Where delivering babies was once a basic competency of the old-time country doctor, rural residents will increasingly have to travel to find obstetric care.

Even family physicians who don’t do obstetrics saw their premiums rise 115 percent, to $9,000 annually, according to Medical Mutual. Another high-risk group is general surgeons, who can expect to pay $40,000 a year for malpractice insurance, a 127 percent increase, according to Medical Mutual.

Targets are not just a few “bad apples”

The country has become so litigious that it’s likely that most doctors will be sued at some point in their careers. In a new study for the John Locke Foundation, Michael Krauss, professor at the George Mason University School of Law, said that it’s no longer possible to blame malpractice cases on a handful of “bad apples” among physicians. In fact, 55 percent of emergency-room physicians, 62 percent of obstetricians, and 70 percent of general surgeons average at least one malpractice suit filed against each of them.

Krauss emphasizes that the tort system was never intended to become a substitute for insurance, or to make good every misfortune suffered by innocent people. “Rather, the essence of tort law is to reallocate risks when one person has wrongfully and without consent caused harm to another,” Krauss wrote.

Unfortunately, juries don’t always see it this way. Krauss mentions a 1997 North Carolina case in which the parents of a neurologically handicapped child got a jury award of $23 million. Krauss tartly observes that even the plaintiff’s lawyer “seemed to concede that his case was not really about proving physician wrongdoing so much as it was about getting money from an insurer to take care of the upbringing of a handicapped child.”

With the legal system targeting whomever is presumed to have the deepest pockets, doctors have learned to practice “defensive medicine.” To avoid second-guessing by lawyers, many physicians will order unnecessary tests. Family practitioners will refer cases to specialists that ordinarily would be well within their competency.

“The doctor who has been sued… learns to treat his or her patients as future adversaries. Overuse of knowingly needless and expensive procedures… is just one way in which med-mal’s costs filter down to the entire population. Demoralization of the healing arts is another way in which this misdeed is done,” Krauss wrote.

Krauss isn’t terribly optimistic about many of the ideas that have been offered for reining in malpractice premiums. He believes that a California-type cap on pain and suffering is economically and legally sound, although $250,000 may be too little. On the other hand, he sees a “hard cap” on both economic and noneconomic damages, such as Virginia instituted a few year ago, as unfair. A limit on economic damages means that a patient with a legitimate case might end up stuck with huge medical bills and lost wages. Meanwhile, those with relatively minor claims would have a good chance of recovering 100 percent of their losses.

Krauss also doesn’t think much of another idea that surfaces in most debates on malpractice — capping lawyers’ contingency fees.

The North Carolina Academy of Trial Lawyers has maintained that any crimp on the percentage a lawyer can earn from a case would only restrict the people’s access to the court system. Many plaintiffs don’t have the money to sue, and medical malpractice cases are notoriously expensive to try, requiring many hours of preparation and the hiring of expert witnesses.

A typical contingency cap might limit lawyers from collecting more than 30 percent of the first $250,000 and 10 percent of anything above that. But Krauss noted that the only effect of such a cap would be to induce lawyers to jack up their demands for damages still further.

Bob Fliss is a Triad-based contributing editor at Carolina Journal.