THE PHONY ASSAULT ON EDWARDS.
Trial and Error
by Jonathan Cohn
<font size=3>Post date: 07.09.04
Issue date: 07.19.04
At first glance, the White House archives suggest nothing unusual about President Bush's activity on January 16, 2003. Appearing before a university audience in Scranton, Pennsylvania, Bush touted his proposal for curbing medical malpractice lawsuits by limiting jury awards. It was a familiar conservative cause he had championed many times before, and he hit the usual notes in his speech: that "there are too many lawsuits filed against doctors and hospitals without merit" and that the malpractice system is "one of the main reasons" for rising health care costs. But, inside the White House, the day had a very special purpose. Even though John Edwards was, at the time, just one of several Democratic presidential hopefuls, Bush was staging a preemptive strike against him. One Bush adviser actually told the Associated Press that January 16 was "Whack John Edwards Day."
Now that John Kerry has picked Edwards as his running mate, every day is going to be Whack John Edwards Day. And you can bet medical malpractice will be a big part of the assault. Partly, this is because Edwards is a trial lawyer who first rose to fame--not to mention fortune--by taking on malpractice cases. And partly, this is because malpractice reform holds out the promise of reducing the traditional Democratic political advantage on health care, an issue that Kerry has pledged to emphasize this fall and one that weighs heavily on the minds of voters.
Bush has a point when he talks about the current medical malpractice system. It is severely flawed, and the political resistance of trial lawyers is a real impediment to fixing it. But Bush is wrong to blame the malpractice system for the entirety of America's spiraling health care costs--it's only a tiny aspect of a much more complex problem. Font color=red>What's worse, when Bush starts talking about solutions, he advocates policies that help primarily a narrow class of Republican financiers, even as he pretends to fix an urgent problem that afflicts most of the country.
<font color=black>It's often said that a good medical malpractice system should have two goals: deterring doctors from committing malpractice and compensating its victims. And, as Paul Ginsburg, president of the Center for Studying Health System Change, puts it, "Our current system has failed badly in both of those tasks."
One reason the current system fails to deter malpractice is that it discourages physicians from talking about mistakes. Today, a doctor who acknowledges an error exposes himself to a lawsuit; yet it is through precisely those introspective conversations that physicians, along with hospitals and managed care companies, can best identify and fix systematic problems in patient care. More subtly, the current system fails to prevent bad medicine because it doesn't impose more severe financial penalties on those who commit the worst infractions. A 2002 analysis by Public Citizen showed that just 5 percent of all physicians are responsible for nearly half the money paid out in malpractice awards every year. But--unlike a car insurance company, which demands higher premiums from drivers with poor records--the companies that insure doctors against malpractice awards traditionally haven't charged these troublesome physicians more. Instead, they typically charge all local physicians of the same specialty the same rate.
All of which might not be so awful if the current system at least served patients well. But it doesn't. Yes, those patients who find the right lawyers can receive money to compensate them for their lost incomes and suffering--sometimes quite a lot of money, which is why critics of the system frequently call it a lottery. But those who don't make it to court end up with very little, and they may actually comprise the majority of malpractice victims. A frequently cited study from the reputable New England Journal of Medicine analyzed data from New York state in 1984 and found that just 1.5 percent of likely malpractice victims ever sued.
What's more, outsized jury awards don't fully explain ballooning malpractice insurance premiums. Insurance carriers hike rates whenever their investment portfolios decline, and the General Accounting Office estimates that this explains half of the recent rise in malpractice premiums. Meanwhile, the liability insurance industry itself admits that, of all the money physicians and hospitals pay as premiums, less than half is used to cover payments to the victims of malpractice. The rest goes to overhead, in the form of defense costs and insurance company administration, and to profit.
It's not hard to envision a better medical malpractice system--one that still allowed for large jury awards in cases of true negligence, but that handled the majority of bad medical outcomes through a no-fault system requiring more disclosure and analysis of medical errors. Ideally, such a system would also include more aggressive disciplinary action against habitually negligent physicians, either by licensing boards or a government body. And most of the money coursing through the system would end up where it belongs: not in the pockets of trial lawyers, but of those who suffer physical harm. But that's not something you're going to hear from the trial lawyers--and, as a result, it's not something you're going to hear from most Democrats, at least until somebody else starts the conversation.
Unfortunately, the Republicans have their own favored political financiers, many of whom represent corporate interests. And, like the trial lawyers, they seem less interested in improving medical care than in advancing their own agenda--in this case, limiting their financial exposure and reducing lawsuits generally. So, while Republicans actually do talk about the problems with the current malpractice system, they tend to limit their proposed reforms to blunt measures that would simply restrict the amount of money even the legitimately aggrieved can claim, while failing to propose alternative methods for improving the quality of medicine or for punishing negligent physicians. Sure enough, this is the approach Bush advocated back in January 2003 and continues to tout today.
Where Bush and the Republicans really veer into questionable territory, though, is in their argument that malpractice suits account for the rapid increases in health insurance premiums for average Americans--increases that have priced many out of insurance altogether. They base this argument largely on the theory that the threat of malpractice lawsuits forces doctors to practice "defensive medicine"--ordering unnecessary tests and procedures that drive up the cost of health insurance. The White House claims defensive medicine increases overall health spending by 5 to 9 percent every year. Or, to put it another way, eliminating defensive medicine would reduce the nation's total health bill by $60 billion.
Although still a small fraction of overall health care spending, if spent properly, $60 billion could buy health insurance coverage for 20 million people (about half of the current uninsured population). And it's not as if the administration pulled this number out of thin air. It's based on a pair of papers co-authored by Mark McClellan, a fully credentialed economist and physician who, despite having served for years in the Bush administration, has maintained his reputation for academic integrity. The two papers compared the spending on patients with certain severe heart conditions in states that have caps on the amount juries can award in malpractice cases with states that don't. The difference, they found, was that magical 5 to 9 percent.
But the McClellan papers focused on just one type of health problem for one narrow slice of the population. When the nonpartisan Congressional Budget Office (CBO) tried to replicate the findings for other health problems and other groups, it couldn't. Specifically, it "found no evidence that restrictions on tort liability reduce medical spending." And, when it compared per capita health spending in states with liability restrictions to states without the restrictions, it again "found no statistically significant difference." So, while the CBO didn't discount the existence of defensive medicine, it was highly skeptical of the administration's claim that malpractice cases are a major source of higher health insurance premiums. And most experts argue that a variety of other factors--including new technology and patient demands for expensive diagnostic tests--matter far more.
If the administration was serious about addressing rising health insurance premiums and the large numbers of uninsured Americans--the problems most on voters' minds this election year--it would take a different approach. It might, for instance, work toward a universal coverage system, perhaps by strengthening existing programs for the poor while opening up the federal employees plan to individuals who can't buy coverage on their own. That is, in fact, the approach Kerry and Edwards advocate. It's far more ambitious than anything the Bush administration has proposed--and likely more effective, too. No wonder Bush would rather talk about something else.
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