Opinion: Carolina Beat

No. 668: Medical Malpractice Reform: Getting It Right

A number of interest groups and legislators are suggesting that North Carolina’s laws guiding medical malpractice lawsuits be reformed. Physicians and insurers say that jury awards for “pain and suffering” are arbitrary and often reflect jury sympathies, not hard evidence. The alleged result is higher insurance costs to doctors and patients.

Nationally, between 1994 and 2000, average jury awards tripled. For all but two of the last 12 years insurers have paid out more in claims than they have received in premiums. In 2002 insurers paid out $1.65 for every premium dollar received. The higher insurance rates allegedly generated by these trends are cited as a reason why insurers have left some markets and why some doctors have left certain specialties such as obstetrics/gynecology, where awards and premiums have skyrocketed.

Based on research by the U.S. Department of Health and Human Services, the American Medical Society has categorized North Carolina as in a “state of crisis.” According to HHS data, from 2001 to 2002 North Carolina had a 50 percent increase in premiums for medical specialists, the eighth-highest in the country. According to the North Carolina Medical Society, insurance premiums for hospitals in the state have risen by more than 400 percent in three years. Last year, rates for rural hospitals rose by 180 percent. The American Association of Neurological Surgeons has designated North Carolina as a state in “severe crisis” for neurosurgeons. A “severe crisis state” is one that has had either a “50 percent increase in premiums from 2000 to 2002, or average premiums near or over $100,000.”

In the General Assembly, Sen. Robert Pittenger, R-Charlotte, has proposed legislation that would cap pain and suffering awards at $250,000. The damages, which include psychological trauma and stress, are not directly quantifiable. There would be no caps on economic damages, including medical costs, lost wages and other income, transportation, etc. Pittenger’s bill also includes a cap on lawyers’ fees and a provision to allow payouts over a court-determined period of time rather than in a lump sum.

These suggested reforms are a good starting point, although the caps on lawyers’ fees should be rejected. They are inconsistent with free contract and, as with all price controls, they will distort competition among lawyers and lead to fewer choices for clients.

Ideally, pain and suffering awards should reflect actual harm, but there are no standards to guide juries, whom often are influenced by the plaintiff’s personal appeal or the deep pockets of a defendant. As an alternative to arbitrary caps legal scholars have suggested establishing pain and suffering standards, with dollar amounts attached for different injury categories. Professors Joseph Newhouse and Paul Weiler at Harvard argue for a damage scale “running from a floor to a ceiling containing standardized injury profiles and specific…amounts that will govern the…juries’ appraisal of particular claims.” This would make awards more rigorously determined and consistent from case to case.

Other reforms should include implementing a “loser pays” policy, in which a defendant who lost a case would pay the legal fees of the defendant, and changing the process for evaluating expert testimony. The system often favors reaching a settlement even if the defendant would be acquitted. For example, if it would cost $75,000 to defend against a lawsuit, the defendant often would settle out of court for any amount less than that. Therefore, some suits are brought even if the odds of winning in court are low. North Carolina should adopt a loser-pays policy. This would help discourage frivolous lawsuits and false accusations.

Second, because jurors usually do not have medical backgrounds, they often can be swayed by junk science. An example is the legal attack on silicone breast implants, which had no foundation in sound science but reaped large jury awards. Legal scholar Walter Olson suggests “empowering judges to exclude more scientifically doubtful testimony,” and implementing “juror selection reforms to keep citizens with medical expertise from being systematically excluded from jury service.”

Medical malpractice reform should be a high priority. Pittenger’s legislation is a good start, but it does not address some of the root causes of the problems that currently exist. A sound legal system that fairly redresses grievances is a right of both potential plaintiffs and defendants. Ultimately it will lead to better health care at lower costs.