My argument against Tort reform via malpractice caps

A good friend of mine recently put up a pretty long facebook screed about the state of the healthcare thing, and I felt the need to respond. I addressed the entirety of it in an email to him, but since I did all this research re: tort reform specifically I thought I'd share it with the masses.

Here's the TLDR version:

• Its anti-states rights. Many states already have malpractice damage caps and all states could implement them if it suited them.
  
• It provably doesn't lower malpractice insurance premiums according to the biggest malpractice insurer.
  
• It doesn't even show a correlation between existence of malpractice caps and the price of healthcare - again, many states already have caps and the existence of those caps does not equate to lower heathcare costs.
  
• It doesn't remove the primary incentive for junk prescriptions and tests - payola. Industry spends billions each year directly influencing doctors.
  
• It gives away patients rights after they've been crippled by negligent docs, even if a jury agrees that they should have damages awarded.

Enjoy!

[Do] Tort reform.. ie the millions that are spent on protective medical practice that doctors spend on covering their ass against lawsuits.

Tort reform is interesting in just how little it would actually do to fix most of the major problems with the system and how much it would cost us as patients.

starting off-


Of course the first argument is that there's really nothing preventing the states of the union from enacting their own versions of tort law, and naturally each state handles it pretty differently. Here's a nice guide as to what the ground rules are in each state.

The federalist argument is of course that States should get to decide what they want and not have tort laws dictated to them by Washington, and that is the current status quo. This allows each state to set up laws according to their own unique constituencies and encourages competition between states for the most effective laws. I'll admit that I'm not much of a federalist when it comes to public safety (though I am in other areas), but I'm just pointing out that the tort reform argument runs counter to the principles of capitalists and federalists because it asks Washington to set the tort laws uniformly for all states while removing the ability of states to offer competitive legislation.




moving on-

When evaluating any potential change you have to honestly evaluate what the specific change is, and look to concrete data. Texas, for example has pretty tight medical malpractice lawsuit caps. Texas also kills a lot of people in hospitals. Texas healthcare is also not measurably less expensive than in a state like Arizona, which does not cap malpractice suits. Here's a fun map of per capita health care expenditures by state.

Relevant data (referencing links given above):

• Texas caps malpractice pain and suffering awards at $250k
• per capita cost of healthcare in Texas $1728 (in 2004, best data I could find)

• Arizona does not cap malpractice on pain and suffering awards (Constitutionally prohibited there)
• per capita cost of healthcare in Az is $1479 in 2004

• The existence of a tight malpractice cap in Texas can't keep healthcare costs below what they are in Az, which has no cap.
  

or, to look at it another way:

• DC is far and away the most expensive district in the union in which to receive healthcare: $4081 per capita in 2004
• Heathcare in DC costs almost 3x as much as it does in Arizona
  
• Neither state has malpractice caps
• Almost every other state in the union has per capita healthcare costs in between these two states.

When you look at the data, there just is no clear correlation between the existence of malpractice caps and the price of healthcare to the end user.




continuing -


The arguments roots extend to the price of malpractice insurance. IOW, if you cap malpractice awards, then the price of malpractice insurance will go down, allowing doctors to charge less to patients. The problem is that the nation's largest malpractice insurer doesn't see it that way. Here's a quote from that article (emphasis mine):

GE Medical Protective's finding was made in a regulatory filing with the Texas Department of Insurance (TDI),in a document submitted by GE to explain why the insurer planned to raise physicians' premiums 19% a mere six months after Texas enacted caps on medical malpractice awards.

In 2003, Texas lawmakers passed a $250,000 cap on non-economic damage compensation to victims of medical malpractice caps after Medical Protective and other insurers lobbied for the change.

According to the Medical Protective filing: "Non-economic damages are a small percentage of total losses paid. Capping non-economic damages will show loss savings of 1.0%."

So what percentage of that 1% of insurance premiums do we expect the doctors to give back to the patients? Now given that we can certainly have a legit conversation about the state of malpractice insurance in this country, but the argument that capping malpractice awards does much for we the patients is pretty weak according the numbers provided by the insurers.

And then there's the reason for malpractice laws in the first place. If a doctor does a procedure on you and is grossly negligent, he can accidentally cripple you. In Texas there isn't much recourse if the doc you go to relieves you of your ability to use your legs. That gives lots of crappy docs lots of reason to come practice medicine here instead of in Arizona.




last one, I promise-


The last leg of the tort reform argument is that doctors are forced to practice defensive medicine in order to avoid lawsuits. I'll not argue that this doesn't exist, but I will argue that there are better ways to address the problem than capping malpractice awards.

What are the incentives for a doc to order a questionable test on a guy?

• minesweeping for anything he may have missed (science is hard)
  
• habit (dude has chest pain, lets get an ekg)
  
• fear of lawsuits
• and of course - money

Generally the point I'm going to make is that lots and lots and lots and lots of the money that pharmaceuticals and medical equipment manufacturers make goes to docs in the form of direct marketing. This means that the megacorp like Pfizer will send a rep to talk with a doc, usually by taking him out to lunch. He'll give him some free samples as part of a "clinical trial," and will encourage the doc to prescribe that drug to his patients in the future. Then he'll set up another meeting in 2 weeks. Oh yeah, and there are 1400 of these reps, doing this exact job, for every single doctor in this country.

Here's a fun exercise - Ask a doc when was the last time he bought lunch for himself. I'll put a couple of quick numbers in context (emphasis mine):

Currently, there are approximately 100,000 pharmaceutical sales reps in the United States^[7] pursuing some 830,000 pharmaceutical prescribers. A pharmaceutical representative will often try to see a given physician every few weeks. Representatives often have a call list of about 200 physicians with 120 targets that should be visited in 1-2 week cycles.

The United States has 90,000 pharmaceutical representatives or 1 for every 6.3 physicians.^[3]

Pharmaceutical company spending on marketing far exceeds that spend on research.^[14][3] In 2004 in Canada $1.7 billion a year was spent marketing drugs to physicians and in the United States $21 billion were spent in 2002.^[4] In 2005 money spent on pharmaceutical marketing in the US was estimated at $29.9 billion with one estimate as high as $57 billion.^[3] When the US number are broken down 56% was free samples, 25% was detailing of physicians, 12.5% was direct to consumer advertising, 4% on hospital detailing, and 2% on journal ads.^[4] In the United States approximately $20 billion could be saves if generics were used instead of equivalent brand name products.^[3]

Currently, there are approximately 100,000 pharmaceutical sales reps in the United States pursuing some 120,000 pharmaceutical prescribers.^[28] The number doubled in the four years from 1999 to 2003. Drug companies spend $5 billion annually sending representatives to physician offices. Pharmaceutical companies use the service of specialized healthcare marketing research companies to perform Marketing research among Physicians and other Healthcare professionals.

What happens is that every doctor in every hospital in every state has every lunch and many dinners bought and paid for by the pharmaceutical and medical equipment industry. They are also legally allowed to accept gifts like junkets and even cash/real estate from these entities. In return, try to walk into a hospital, make up and complain of any ailment, and walk away without a prescription for something. I'll bet you can't do it.


So what happens when we remove the fear of lawsuit incentive from docs? Well, we've left intact the biggest motivator that they have to continue with the junk tests and prescriptions - the free lunch, all while removing the ability of patients to receive the resources needed to cope with getting crippled - even if a jury of their peers deems that type of thing appropriate. Tort reformists would prefer Washington to make those decisions. The net effect is that you get what you see with the states that already have caps - no discernible effect on healthcare costs.