Perhaps it’s expected that fuzzy thinking would go into some of the recommendations made by President Obama’s National Commission on Fiscal Responsibility and Reform when reviewing the federal budget. Surprisingly, medical malpractice reform appeared in the co-chairmen’s report, with the usual ideas to increase revenues of the insurance industry but do little else. While the report hasn’t received the necessary votes to send it to Congress, it wouldn’t be surprising to see some of the ideas raised in the next Congress.

The report made several recommendations that claimed to reduce the direct costs of insurance premiums and the indirect costs of so-called defensive medicine, including modifying the collateral source rule to allow outside sources of income and insurance to be considered when making an award; modifying the statute of limitations to one to three years; replacing joint and several liability with a rule under which each party would be liable for that part of the harm that was equal to his or her negligence; creating health courts; and, perhaps most insidious, allowing safe haven rules for providers that follow best practices of care. It also noted that many members of Congress believe caps on non-economic and punitive damages should be considered.

Nowhere did the report consider the most expensive aspect of medical malpractice — injuries and deaths caused by medical negligence. Neither did it consider the salutary effects of the civil justice system in creating incentives to reduce preventable medical harm or consider the further uses that could be made of the data from medical negligence lawsuits to improve safety in hospitals and medical practices.

The recommendations also didn’t demonstrate an understanding of the cost basis of medical liability insurance or the instability in the markets. Multiple studies have demonstrated that claims have declined over the past decade, while spikes in insurance rates were related to the investment cycle. If the commission’s chairmen were serious about reducing the cost of medical liability, their goal would have been reducing the causes of medical negligence and reform of the insurance industry, not limitations of patient’s rights.

Preventable medical errors are the sixth largest cause of death in America. The Institute of Medicine’s 1999 foundational study, “To Err is Human: Building a Safer Health System,” estimated that as many as 98,000 Americans die each year as a result of medical negligence. The Congressional Budget Office found that there were 181,000 severe injuries attributable to medical negligence in 2003. The CBO in 2008 estimated that major changes in the medical negligence system would result in savings of a relatively negligible 0.2 percent in overall healthcare spending.

Preventable medical injuries include medication errors, which result in 7,000 deaths per year at a cost of $3.5 billion. These could be reduced by using computerized physician order systems, prescription bar coding and smart pumps.

Hospital-acquired infections claim the lives of 90,000 people a year at a cost of $4.5 billion, and post-surgical infections injure or sicken 500,000 people a year at a cost of $1.5 billion. Simple solutions like hand washing, use of prophylactic antibiotics, use of electric scissors instead of pre-operative shaving, and increased care in the use of ventilators and catheters can prevent a substantial percentage of these debilitating infections with their concomitant increase in health care costs. Aggressive diagnosis and treatment of intra-operative infections has the potential to prevent substantial morbidity and loss of implanted hardware, around which bacterial infections can thrive.

As many as 20 percent of patients fall while in the hospital, and many falls can be prevented through systematic reform, including: the provision of additional support for high-risk patients; scheduling bathroom visits in order to assure adequate support staff (the greatest number of falls occur here); and the use of skid-resistant footwear. The terrible pain and disability associated with decubitus ulcers can be substantially reduced with regular turning of patients.

Cost savings from reducing the number of infections, falls, medication errors and decubitus ulcers would dwarf the savings from limiting the rights of victims of medical negligence. Increased attention to safety always results in reduction of costs of injuries caused by careless practices.

In terms of the direct costs to the national health care bill of having a system of accountability in place, caps have reduced payouts to some extent but have not resulted in the reduction of premiums. Data derived from Medical Liability Monitor’s annual rate survey shows that the average premium for internists, general surgeons and obstetricians in 2009 were slightly higher in states that had adopted limitations on patient rights than in those that had not. According to a study by Jay Angoff, the former Missouri Insurance Commissioner, insurance premiums increased by 120.2 percent from 2000 to 2006, while the dollars paid out by insurers declined by 13.7 percent. According to A.M. Best, the inflation-adjusted payment for medical negligence costs is the nearly the lowest that it has been in 30 years.

A study entitled “True Risk: Medical Liability, Medical Insurance and Health Care,” published by Americans for Insurance Reform (AIR) in 2009, concluded the following:

• “Medical malpractice claims, inflation-adjusted, are dropping significantly, down 45 percent since 2000;

• Medical malpractice premiums are less than one-half of one percent of the country’s overall health care costs; medical malpractice claims are a mere one-fifth of one percent of health care costs. In over 30 years, premiums and claims have never been greater than 1 percent of our nation’s health care costs;

• Medical malpractice insurer profits are higher than the rest of the property casualty industry, which has been remarkably profitable over the last five years;

• The periodic premium spikes that doctors experience, as they did from 2002 until 2005, are not related to claims but to the economic cycle of insurers and to drops in investment income; and

• Many states that have resisted enacting severe restrictions on injured patients’ legal rights experienced rate changes (i.e., premium increases or decreases for doctors) similar to those states that enacted severe restrictions on patients’ rights, i.e., there is no correlation between ‘tort reform’ and insurance rates for doctors.”

Too often, the focus is not on systematic safety reform in health care, but on the costs of malpractice insurance and the much-promoted notion that doctors order unneccessary tests to avoid liability. The projected savings in these two areas by changing medical negligence law have been questioned by numerous sources. While it might be initially questioned as to how the failure to order a completely unnecessary test would increase the likelihood of a liability finding, the propagation of this myth continues. The concept of defensive medicine, when used to rule out potentially life-threatening or serious medical conditions, would seem to be entirely consistent with the golden rule of medical diagnosis. It is only the failure to order a necessary test that would have diagnosed a serious condition that could affect the outcome of a medical negligence case.

The real source of medical liability costs is seen in the National Practitioner Data Bank, which shows that 6 percent of doctors are responsible for 58 percent of all negligence payouts. The medical disciplinary system has substantially failed to impose discipline on these doctors and few are ever suspended or lose their licenses to practice. The malpractice system is essentially the only means for disciplining or imposing a cost on these negligent practitioners, while providing necessary compensation to those who have been harmed.

There is little evidence that any of the changes to the liability system recommended by the fiscal commission co-chairmen would result in significant reduction in costs, according to a survey of studies by the Rand Corporation. Several studies correlate a fear of liability leading to increased imaging, but also to improved patient outcomes. Some studies indicate that caps on non-economic damages reduce payouts, but they do so unfairly in that they deprive the most seriously injured victims with the most expensive long-term care costs of necessary compensation. Multiple studies have looked at legislative benefits bestowed upon the medical profession such as restrictions on or elimination of joint and several liability, or the collateral source rule. The studies found little or no impact on insurance rates.

The “True Risk” report indicated, “According to the industry’s own data, total annual payouts for everyone in the country have stayed under $5 billion per year since 2005, approximately what they were in the late 1990s even before inflation adjustments. Moreover, inflation-adjusted per doctor claims have been dropping since 2002 from $8,676.21 that year to $5,217.49 in 2007 and $4,896.05 in 2008. At no time during this decade did claims spike, or ‘explode.’ Rather, payouts in constant dollars have been stable or falling throughout this entire decade, down 45 percent since 2000.

“In sum, these data confirm that neither jury verdicts nor any other factor affecting total claims paid by insurance companies that write medical malpractice insurance have had much impact on the system’s overall costs. Only medical inflation and growth in the number of doctors correlate with the paid loss trends.”

States

Rather than depriving the most severely impaired victims of medical negligence of compensation by legislatively imposed caps, Pennsylvania adopted a system that addressed the medical insurance crisis of the last decade with changes designed to eliminate cases where alleged harm did not result from medical negligence. Requiring a certificate of merit from a physician with credentials matching that of the negligent defendant appears to have eliminated many non-meritorious cases. The requirement of filing in the county where the negligence occurred reversed the usual rule that the plaintiff’s choice of forum should be respected, forcing many cases into conservative counties.

These reforms, and the unfounded fear among jurors of doctors leaving the state in droves, have resulted in a major reduction in malpractice filings. Chief Justice Ronald D. Castille reported in April that there were 1,533 filings in Pennsylvania in 2009, representing a 43.9 percent decline from the base years of 2000 to 2002. The reduction in the filing of non-meritorious cases is a desirable objective and has largely been accomplished by the certificate of merit requirement without unfairly limiting recoveries of severely injured patients.

The reality in the medical malpractice world is that plaintiffs lawyers screen and reject 80 to 90 percent of medical negligence claims on which they are consulted at no cost to the medical providers or insurers. The number of doctors in Pennsylvania has increased from 36,882 in 1996 to 43,257 today, according to the American Medical Association, making it sixth among states for number of doctors per 100,000 population.

While there may be merit to finding ways to reduce the costs of malpractice litigation for both plaintiffs and physicians, creating additional hurdles for the plaintiffs should not be one of them. Likewise, creating safe harbor best practice standards that could be manipulated in order to create the lowest possible standard against which to measure medical care would do more to reduce patient safety than costs.

Using federal legislation to change existing state statutes of limitations, presumably to eliminate the discovery rule, would be enormously unfair to injured patients whose conditions were not diagnosed until such a draconian statute had expired. Courts have dealt with the discovery rule on a case-by-case basis in order to achieve fair results, which could never be done through federal legislation.

There are many areas of concern with the rising cost of medical care in America, but limiting patients’ rights would deprive seriously impaired people of the right to needed compensation. It would also increase the burden on the taxpayer for the care, and medical services necessitated by the harm caused by negligent medical care. Malpractice limitation is one part of the fiscal commission co-chairmen’s recommendations that should land on the cutting room floor.

Thomas L. Gowen is a partner at Locks Law Firm’s Philadelphia office. He is a graduate of Haverford College and Villanova School of Law and he can be reached by calling 866-298-9934 or e-mailing tgowen@lockslaw.com.