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Malpractice Suits Are Blamed for Rising Health Care Costs/Tort Reform Is Capping Awards for Damages, Business and Industry Trends Analysis

Health care costs have long been a hot political topic, and many people have pointed at malpractice lawsuits as a primary cause of rising costs.  For years, punitive lawsuits for pain and suffering have levied huge settlements from doctors, hospitals and their insurers.  In reaction, premiums for malpractice insurance have burgeoned, growing far faster than the costs for any other type of insurance.  Doctors and hospitals, in order to offset malpractice insurance premiums, may raise their own fees and conduct extensive, and often unnecessary, tests in order to protect themselves from legal claims.  These factors contribute significantly to the overall cost of health care in the U.S., and a political battle has ensued, particularly between lobbyists for plaintiffs’ lawyers and lobbyists for the health care industry.
There is wide disagreement about the causes and actual yearly combined costs of malpractice insurance, litigation, lawsuit awards and defensive medical procedures and tests intended to lessen the likelihood of a malpractice lawsuit loss.  A 2013 Jackson Healthcare survey found that 75% of doctors order more tests, medications and procedures than are medically necessary to protect themselves from lawsuits.
In addition to adding immense costs to the health care system, malpractice lawsuits have done much to erode the relationship between doctors and their patients.  At the same time, fear of malpractice suits can discourage young physicians from pursuing higher-risk specialties, such as obstetrics and emergency room care, rather than fields where they are much less likely to be sued.  Relations between doctors and lawyers have also become strained, with many doctors blaming the situation on some lawyers’ willingness to take even the most frivolous cases.  Malpractice insurance premiums vary widely, according to the type and location of the practice.
Self-interest has caused some physicians to respond.  Reports have been published of physicians refusing to treat attorneys, their families or their employees except in cases of emergency.  Meanwhile, many would-be patients have learned how hard it can be to get a physician in high-risk fields, such as obstetrics and gynecology, to take a new client.
Many states are tackling the malpractice awards issue through referenda and legislation that limit total damage awards.  Texas, after suffering years in which more than 50% of practicing physicians were hit with malpractice suits, passed legislation to limit awards given to plaintiffs for “non-economic” damages, which include pain, inconvenience, suffering and disfigurement.  Dozens of states have now limited non-economic damages in medical malpractice cases, generally to amounts between $250,000 and $500,000 dollars.  The statutes also generally limit the amount that lawyers can make off such cases via contingency fees, making sure that the plaintiff receives a substantial portion of the reward.  Some critics of this move see such laws as contributing to a failure of the justice system.  Others feel that a $250,000 to $500,000 award cap is not fair payment for a patient who has been severely disfigured for life.
On the other hand, there may be few limits on the amount of “economic” damages awarded to a patient—that is, loss of earnings due to the inability to function fully at a job or profession.  Patients who earn extremely high salaries may seek damages that are proportionately high—even multimillion-dollar amounts.  However, attorneys may be discouraged from taking, on contingency, clients who work in low-paying jobs or have very complicated cases.
As in any other legal matter, there are two sides to the story; arguments for and against malpractice award limits abound.  California is often named as the poster child for how effective such legislation can be in lowering insurance premiums and health care costs in general.
Texas enjoyed stunning success as a result of its tort reform.  Malpractice rates fell with more than 30 malpractice insurance firms competing for business in the state.  Texas experienced a resurgence in the numbers of practicing physicians as well since malpractice insurance premiums dropped significantly.  The number of malpractice lawsuits in Texas has been cut dramatically.
Meanwhile, the costs and challenges of lawsuits are not limited to physicians.  Every sector of the health chain, from equipment makers to hospitals to drug makers, is swamped by lawsuits, and they are forced to pass along the costs of insurance and litigation in the form of higher fees charged to patients.  Tort reform is beginning to take hold for these sectors as well.  It is worth noting that the 2010 Patient Protection and Affordable Care Act (ACA) did not make any provision for limiting malpractice damages.

Internet Research Tip:  Malpractice Awards
The National Practitioner Data Bank,, is a federal initiative that collects data on malpractice lawsuit awards and license revocations, on a state-by-state basis.  It publishes annual reports that provide detailed information.

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