Myths: Tort Reform, Runaway Juries and Frivolous Lawsuits

Who first uttered the words “tort reform” in the context of medical malpractice lawsuits?

It had to have been an ingenious insurance executive who has long since retired after being richly rewarded by the insurance industry.

Why? Because when it comes to “tort reform” there is a single winner: the insurance industry. Doctors and hospitals lose…or at least they win nothing. Consumers lose enormously. Taxpayers lose and victims and medical negligence are the really big losers.

An article recently published in the medical journal, Chest (Chest 2013; 143 (1): 222 – 227), the authors discussed the truth about medical malpractice in “Five Myths of Medical Malpractice”. They borrow a quote from Senator Daniel Patrick Moynihan that aptly characterizes how the medical malpractice crisis has been spun by the insurance industry and tort reform groups:

“Everyone is entitled to his own opinion, but not his own facts.”

Because not everyone can access the article without paying for it, let me try and summarize the important highlights of the authors’ findings.

Myth: Malpractice Crises are Caused by filing More Malpractice Litigation and “Runaway Jury Verdicts.

Completely untrue. Statistics drawn from the National Practitioner Databank demonstrate that medical negligence claims against physicians have been steadily dropping since 1992 and the numbers today are roughly one-half what they were in 1992.

Payout per physician was roughly stable from 1992 to 2001 but dropped in 2003 and is now 46% below the 1992 level.

The “runaway” jury verdicts that attract popular attention are not at all representative and often are largely reduced by judicial oversight or through other means. More broadly, the overwhelming majority (95%) of cases is resolved, and the overwhelming majority of payouts are made because of voluntary settlement.

Myth: Frivolous Medical Malpractice Cases are Rampant in the Tort System.

Wrong. Like any other notable occurrence, the press moves public focus on any substantial jury verdict; usually without regard for whether the amount was supported by the evidence. It is the amount that the press seeks to highlight. There are no statistics, anywhere, in any state, that support the notion of any numbers of frivolous malpractice claims that would be considered anything other than “wholly insignificant”.

A much larger problem exists and especially in states that have implemented tort reform:

“A far larger problem, however, is that an enormous fraction of patients who are harmed by medical negligence either make no effort to recover damages or cannot find lawyers willing to take their cases . These patients, who are entitled to compensation, never sue.”

Because plaintiffs can not afford to pay attorneys by the hour, law firms agree to take a percentage if a recovery is made. Most law firms also carry the costs of the litigation for years, at no interest. So, a lawyer reviewing a potential malpractice case carefully weighs whether the case is valid; what the damages might be; and what the cost of trying the case may be. Often, litigation may take 4 or 5 years; thousands of hours of time; and hundreds of thousands of dollars in costs; before the law firm finds out whether they get paid anything for their time and expense. This has always been the best hedge against frivolous lawsuits in medical negligence cases.

If we examine Texas where some draconian tort reform was passed in 2003, the statistics demonstrate a significant reduction in the number of medical negligence claims and the average dollar payouts (whether settled or through jury verdict) in both the “pre-tort reform” and “post tort reform” periods.

The total numbers of claims before tort reform were 7,650, which dropped to 5,300 after tort reform. Average mean payouts for all large malpractice claims went from $609,000 in the pre-tort reform period to $419,000 in the post reform period.

So, tort reform worked? It probably worked, but not in the way most people believe. When tort reform passes in a state, it makes it that much more difficult for victims of medical negligence to find attorneys willing to undertake representation in their cases. This results in patients injured by medical negligence who then go to private insurers, Medicaid and Medicare to pay for the treatment they will need because of the malpractice.

Who ultimately pays for tort reform? We do – every single person who pays health insurance premiums or taxes.

Myth: Doctors are One Malpractice Verdict Away From Bankruptcy.

First, only about 2% of all medical malpractice claims proceed to a jury verdict and in those cases medical providers win around 75% of the time.

Second, nearly every jury verdict over a physician’s policy limits was settled for their policy limits or their insurance company paid the excess the verdict because the insurance company was dealing in bad faith.

Finally, for at least a decade doctors have been taught ways to shelter their assets from any exposure to malpractice verdicts and by now most all practice this defensive asset hiding.

Myth: When Tort Reform is Passed, Physicians Move to those States in Large Numbers.

Completely false and unsupported by any statistics. The only regions that show any significant increase in physician population after passage of tort reform measures are rural areas.

Myth: Tort Reform Laws Reduce Healthcare Costs of Physicians Practicing “Defensive Medicine”.

We would need to determine whether “defensive medicine” is good medicine or patient protecting procedures; rather than defensive medicine for the sole purpose of avoiding malpractice claims. And, if “defensive medicine” is testing that is completely unnecessary and only to avoid malpractice claims is that not fraud being practiced by physicians?

Who really pays for the cost of tort reform? Injured victims of malpractice, consumers and tax payers.

Who wins? Insurance companies and corporate healthcare.