Lecture 25 - 12/7/99

What are the merits of alternative liability reforms as part of tort reform?

Traditional Tort Reforms

• Aimed at Number of Lawsuits
• Aimed at Size of Recovery (Payment per Paid Claim)
• Aimed at Plaintiff’s Difficulty (or Costs) of Winning
• NOTE: "Reform" means to "correct" pro-plaintiff trend in case law

Aimed at Number of Lawsuits: (RHS: Empirical Evidence Indicates Reform is Effective)

• Attorney fee limits -------- No
• Certificate of merit ------- No evidence
• Costs awardable ---------- Yes
• Pretrail screening --------- Inconsistent
• Statutes of limitations --- Inconsistent

Aimed at Size of Recovery

• "Caps" on damages ----------- Yes
• Collateral source offset ------ Yes
• Joint/several liability ---------- No evidence
• Periodic payment --------------- No

Aimed At Plaintiff’s Difficulty of Winning

• Expert witness requirements ---------- No evidence
• Limit doctrine of informed consent -- No evidence
• Res ipsa loquitur restrictions ---------- No evidence

Relationship of Liability Reform to Health Reform

• Logrolling
• Curb "defensive" medicine
• Increased competition--cost and quality cutting (case against the traditional reforms, link to managed care)
• Increase internal (within organizations) to monitor quality (pertains to new reforms discussed below)

Some New Reform Proposals

• Clinical practice guidelines as standard of care
• Enterprise liability
• Alternative dispute resolution (ADR)
• Selective no-fault malpractice compensation
• Private contracting

Clinical Practice Guidelines

• New laws in some states make it easier to introduce clinical practice guidelines at trial
• Can be used by physicians as an affirmative defense (Maine)
• Example: specify in guidelines when in ER not necessary to obtain a cervical spine x-ray

Clinical Guidelines: Limitations

• Scientific knowledge does not permit guidelines to be written on all, or perhaps most, aspects of medical practice
• Other problems: (1) guidelines may conflict; (2) guidelines may become inappropropriately "gold plated."
• Errors in performance would not be covered by guidelines (mix up X-ray, cut artery)

Enterprise Liability

• Some form of group liability (payer or institution) replaces liability of individual physicians
• Rationale: (1) eliminate costs associated with multiple claims; (2) promote internal quality control; (3) may be more effective deterrent, given underclaiming
• Opposed by organized medicine ("deep pockets" argument)
• Existing examples: University of California hospitals; some large teaching hospitals; HMOs
• No evaluation of effectiveness to date

Alternative Dispute Resolution

• Arbitration, mediation:discuss arbitration here
• Rationale: (1)Arbitration proceeding less formal and costly than trial; (2) Arbitrators become expert in medical issues, determine liability and damage more accurately
• Arbitration may be binding (parties must abide by decision) or nonbinding (may go to trial)
• 2 leading proposals for binding arbitration: (1) voluntary binding arbitration under pretreatment contracts between providers/plans and patients; (2) AMA’s proposal to substitute binding arbitration for conventional tort system
• Caveat: No empirical evidence that malpractice savings result from ADR. Why?

No-Fault Proposals

• Rationale: (1) Current system does not deter injuries; (2) Lots of resources, time and money, spent on resolving claims under tort
• Description: (1) Remove negligence as condition for payment; (2) Proposals generally only pay economic loss net of payment from collateral sources; (3) Could be combined with enterprise liability (experience rate)
• Existing examples: Birth-Related Injury Compensation Programs in Virginia and Florida
• Evaluation of effectivness: No direct evidence to date; evidence from no-fault and Workers’ Compensation

Private Contracting

• Purchasers of care could opt for (1) reduced standard of care (as specified, e.g., in practice guidelines); (2) ADR; (3) caps on damages
• In return, purchasers could pay lower premiums/fees
• Contracting could: (1) Make care standard more explicit; (2) Reduce cost of resolving disputes; (3) Reduce compensation that purchasers of care do not want

But questions remain: (1) Are purchasers of care sufficiently knowledgeable? (2) Can the standard of care be well-specified in a contract (for reasons, e.g, of patient heterogeneity)?
 

Summary and Conclusions

• Traditional reforms based on premise that balance has tipped in favor of plaintiffs
• Only some traditional reforms actually have their intended consequences
• Some alternative reforms, especially enterprise liability, aim to change performance of organizations and to better satisfy consumer preferences, especially private contracting
• However, none of the newer forms is perfect
• Empirical evidence on their performance is lacking

Tort reform as form of logrolling probably not too harmful

Canadian Health Care System

Structure

• Federal-provincial program
• Specific criteria must be satisfied to receive block grant from federal government (about 40% of total expenditures)

Criteria Provinces Must Satisfy

• Universal coverage for all legal residents
• Comprehensive services (minimum set)
• No deductibles, copayments, or extra billing
• Portability between jobs and residences
• Public administration on nonprofit basis (Health Ministries)

Universal Coverage

• No financial constraints placed on individual's utilization==>no differences in access according to income and health status
• Financial constraints applied from top down, not at level of individual patient

Comprehensive Services

• Hospital inpatient care (at standard ward level)
• Hospital outpatient care
• Physicians' services
• Other services vary by province, may include: outpatient prescription drugs for elderly and poor, preventive services, routine dental care for children

Cost Sharing

• None for hospital and physicians' services
• Are out-of-pocket expenses for services not included in provincial plans: routine adult dental care; cosmetic surgery; additional charges for private/semiprivate room
• No disallowances (UR, price ceilings)
• Private insurance often available from employer for noncovered services

Administration: Financing

• Provincial governments receive block grants
• Each province decides how much money to spend on health, which services to cover beyond minimum level, how to finance its share of costs
• Hospitals and physicians have no other source of income unless they opt out of the system
• Province pays hospitals lump-sum payments for operating cost plus payment for approved capital improvements, new equipment, expansion
• Province pays physicians on fixed fee schedule: set by provincial medical association; constrained by limit in growth of spending on physicians' services, negotiated