For years, federal tort reform has been a hot-button issue discussed among the media and our government officials. Proponents argue that tort reform will put an end to the high rate of frivolous lawsuits and thus save taxpayers millions of dollars; opponents argue that tort reform is unfair and will ultimately harm citizens and diminish their rights. But what is tort reform really? And how will it affect Americans?
What is Tort Reform?
First and foremost, a tort is a civil wrong, as opposed to a criminal wrong, in which someone intentionally, or unintentionally through negligence, harms at least one person. Medical malpractice cases are the facet of tort law that will exclusively be affected if federal tort reform is implemented. Federal tort reform is formally known as H.R. 5, or the “Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011.” It was proposed, or “sponsored,” by Georgia’s Republican Congressman John “Phil” Gingrey. As it stands, tort reform is a decision left to states and their voters. However, H.R. 5 implementation means an unequivocal change to this process; it will establish a universal, federal process for all U.S. medical malpractice cases. Put simply, if this act goes into effect in the form approved by the House on March 29, 2012, it will impose the following on all medical malpractice cases in the country:
- A three-year statute of limitation from the date at which one suffered injury, or a one-year statute of limitation from the date at which one discovers his or her injury, at the hands of a medical provider.
- A $250,000 cap on all noneconomic damages, regardless of the number of guilty parties or separate claims filed, and in proportion to all parties’ percent of responsibility.
- Effectively, what this stipulation means is two things. First, it does not matter if there is one or 50 parties found guilty; the claimant (i.e. victim) can only be awarded $250,000 at most for noneconomic damages that were proven to have occurred. Second, if there are multiple parties found guilty, those parties will each pay only the percent of noneconomic damages to which the court has held them responsible.
- A cap on punitive damages of either $250,000 total, or two-times the amount of economic damages, whichever is greater.
- Several limits on punitive damages, including that they may not be awarded when compensatory damages, i.e. the sum of economic and noneconomic damages, are not awarded. They also cannot be included when the initial lawsuit is filed.
- Limits on contingency fees medical malpractice lawyers may receive. The vast majority of lawyers charge contingency fees, meaning they only get paid if they win or settle the case for their client. According to a Harvard study, lawyers’ contingency fees usually amount to 35% of all damages, i.e. “indemnity payments,” their clients recover. This is a huge aspect of H.R. 5, as it reduces the medical malpractice lawyers’ incomes.
What Will Tort Reform Solve?
In enacting these stipulations, H.R. 5 purports in Sec. 102 that it will have five effects. First, health care services not widely offered due to their inherent high malpractice liability will increase in availability, such as medical procedures categorized as “experimental.” Second, it will reduce defensive medicine practices and the cost of medical malpractice insurance, which “contribute to the escalation of health care costs” (H.R. 5, Sec. 102, 16-17). Third, it will protect the legal rights and compensation for citizens with serious medical malpractice claims. Fourth, it will implement a universal, fair, and fiscally-efficient dispute and compensation process to improve the medical malpractice liability system at a national level. Fifth, it will increase information sharing in the health care system to prevent “unintended” injuries, and thus reduce injury rates and increase patient care quality.
What Will the Actual Effects of Tort Reform Be?
At face value, the plan seems ideal. After all, who wouldn’t want cheaper health care, or to disable people from using the system for undeserved financial gain? According to many legal experts, however, this plan is not only flawed theoretically, but is proven flawed in several real-world applications. Experts make the points as stated below.
First, frivolous lawsuits are not the problem with the health care liability system; the problem is increasing medical errors. A 2006 Harvard study found that out of 1,452 malpractice claims, only 3% involved unproven medical injuries, while 63% of the cases involved not only someone who was actually injured, but someone who was determined to have been injured as a result of medical error. Contextually, it is important to know is that this study was conducted by physicians with the claim data supplied to them by five insurance companies; both physicians and insurance companies have a financial interest in the passing of tort reform on a national level, yet their findings were indisputable. In response to this study, Thomas Simeone, a personal injury attorney, states, “This actually indicates that most cases are meritorious – even the ones [hand] selected by the insurance company and reviewed by a physician, rather than a completely unbiased person. [Moreover,] a case is not frivolous simply because a plaintiff loses and it definitely is not frivolous if the plaintiff prevails.”
James Pizzirusso, a consumer protection lawyer, corroborates Simeone and adds that, “The problem in this country is not an overabundance of ‘frivolous’ medical malpractice lawsuits. The true problem is the epidemic of patients injured every year. We all know that health care providers do their best in tough environments, but when patients are injured, they should be compensated.” According to the American Association for Justice (AAJ), “Each year, 98,000 people die from preventable medical errors in American hospitals … This does not include the number of patients … severely, but not fatally, injured by preventable medical errors.”
Second, tort reform will not lower health care costs or insurance rates for either doctors or patients. Though the bill never specifically makes this promise, politicians and the media have claimed such effects will be the case. The idea they express is pretty basic. With less medical malpractice cases, insurance companies will pay out less, and thus lower doctors’ insurance rates. The money saved by doctors will then be passed to patients through the lowering of health care costs. However, according to the AAJ, “Empirical research has found that there is little correlation between malpractice pay and malpractice premiums paid by doctors.” In fact, the AAJ reports that states without caps have an average liability premium of $43,709 while states with caps average $44,799; effectively, not only have doctors in capped states not seen a decrease in premiums, but they actually pay higher premiums.
This is because, not surprisingly, while the number of tort reform cases has decreased in states with caps, any savings are simply pocketed by medical malpractice insurance companies. “History shows us that even if legislation that reduces malpractice recoveries is enacted, health insurance costs do not go down because health insurance companies do not reduce their rates – they simply make more in profits. [H.R. 5] basically hands insurance companies (who pay the bulk of medical malpractice claims) everything they could wish for, short of the abolition of medical malpractice claims entirely,” Simeone said.
Pizzirusso agrees. “There will be little or no effect on malpractice rates from federal tort reform,” he said. “Payouts are already down and the insurance companies are making record profits. They have not lowered rates in response to malpractice reforms passed by the states, and there is no reason to think they will do so now.” In fact, according to the AAJ, “the average profit margin for the top 10 medical malpractice insurers is twice as high as 50 of the most profitable Fortune 500 companies.”
Find out tomorrow in Federal Tort Reform: Politics Begets Politics, Part 2 how tort reform implementation in some states has affected residents, and how such implementations are a premonition of the effects of H.R. 5.