Overview of Medical Malpractice

Modify Medical Malpractice Laws to Reduce the Number and Average Payout of Claims

What is it?

When patients suffer harm as the result of negligent medical care, they are typically entitled to pursue compensation for medical malpractice (MM) through the tort system. In principle, the MM tort system strives to fulfill two main objectives: to compensate sometimes catastrophic injuries to patients when those injuries have resulted from substandard care or malfeasance on the part of medical providers, and to deter negligence. In practice, MM adjudication has become widely controversial, in part because of concerns about the accuracy of the tort system in discriminating between meritorious and other claims (Brennan et al., 1991; Leape et al., 1991; Localio et al., 1991). Concerns have also been raised about the total costs associated with MM claims, about collateral effects on the costs of MM insurance for providers, and ultimately about the potential for malpractice liability to encourage the practice of "defensive medicine." Policymakers at the state and federal levels have proposed bills that would change the way that the traditional tort system operates with regard to MM claims.

How would it work?

There are many potential ways to change the legal rules that govern MM cases if the objective is to reduce the number of claims and/or the average payout per claim. In general, such changes involve statutory intervention in the tort system—designed either to limit the scope of available damages (as through non–economic damage caps), to place limits on plaintiffs' attorney fees, to impose additional requirements for filing claims, or otherwise to make at least some MM claims less attractive to pursue.

Has it been tried before?

Although there have been and continue to be proposals for malpractice tort interventions at the federal level, MM is predominately a state specific phenomenon: (1) state laws establish the fundamental basis for tort liability in MM; (2) many malpractice insurers cover only a single state or small groups of states; (3) malpractice insurance is regulated by states; and (4) malpractice litigation is pursued in state courts and state law sets out the rules for litigation (Mello, 2006). MM has been the focus of a host of state level tort intervention measures over the past 30 years. By 2005, all 50 U.S. states had implemented at least one statutory measure arguably intended to reduce either the number or average payout of MM claims (Avraham, 2006).

Often held up as a model for federal legislation is the California Medical Injury Compensation Reform Act (MICRA) of 1975, which among other things (1) implemented a $250,000 cap on non–economic damages (such as pain and suffering), (2) empowered defendants to inform juries about collateral sources of recovery—such as health insurance, and (3) imposed a sliding scale on attorney contingency fees, capping the amount that attorneys could earn from large awards. By 2005, nearly half of the states had already implemented a non–economic damages cap, slightly more than half had enacted changes to the collateral source rule, and more than a quarter had imposed restrictions on attorney fees (Avraham, 2006).

State legislatures have addressed MM concerns primarily by enacting limitations on traditional legal rules and practices. State statutory interventions have included the following: (1) caps on damages, (2) rules authorizing periodic payment of damages (in preference to lump sum awards), (3) restrictions on awards against secondary defendants (i.e., limiting the rule of joint and several liability), (4) modifications in statutes of limitations, and (5) imposing additional requirements for filing claims. Variations on these have been implemented, piecemeal, among many of the states.

In addition to interventions targeted specifically at MM claims, some states have implemented similar interventions that apply to tort claims more broadly. Some states have considered options aimed at improving the availability and affordability of malpractice insurance—such as requiring insurers to obtain approval before increasing premiums, creating state run malpractice carriers, and allowing business tax credits for premiums. There have also been a few attempts to enhance local capacity to discipline negligent practitioners (such as imbuing state medical boards with new power and resources to suspend or impose conditions on practice). Alternative policy approaches have focused on promoting the efficient disposition of claims, including proposals to create or enhance alternative dispute resolution systems, to create "no fault" compensation programs, and to create programs that combine early, voluntary disclosure and offers of compensation.