Tort Reform and Legal Mythologies: Re-Examining Limits on Tort Actions and Damage Awards

In light of today’s story on the debate over the Virginia damage caps on tort lawsuits against the state, this prior column may be of some interest.

Turning Patients Into Hostages;
Doctors and their insurers are using medical extortion to boost profits.

Last week, virtually all surgeries at four major West Virginia hospitals were suddenly canceled. The reason was not a natural disaster or a health crisis. It was a crisis of a different kind: The profit margin for the medical industry is falling, allegedly because of increases in medical malpractice awards.

These doctors are demanding huge subsidies and legal protections in exchange for resumption of health care. It is a game of chicken being played by doctors across the nation, with their patients’ health in the balance — and it is working.

In the last year, doctors have joined forces with insurance companies to demand sweeping legislative protections and, in some states, public subsidies for their annual insurance payments. Unable to win on the merits of their arguments in prior years, these doctors turned to a form of medical terrorism. They withheld medical treatment and used patients to force the government to yield to their demands.

For instance, last July in Nevada, 50 doctors unilaterally closed the only trauma center in Las Vegas for 10 days, exposing patients to extreme risk. They resumed treatment only when they were assured that the state would move to establish caps on malpractice awards. A similar walkout threat by 42 doctors forced Pennsylvania to cave to demands, including a promised $220-million bailout to help cover their insurance costs.

This issue is now on the fast track in Congress because of the change in Republican Senate leadership. The only organization more eager to see Trent Lott implode in the recent scandal than the NAACP was the American Medical Assn. Lott’s replacement is Bill Frist (R-Tenn.), a physician who is expected to make passing a federal law limiting medical malpractice awards a priority. President Bush has called for such a law modeled on California’s cap of $250,000 for pain and suffering.

Such legislation is a prescription for disaster because it would sharply reduce the deterrent to medical negligence. Given the notoriously low level of HMO care today, that would only further reduce the ability of patients to demand acceptable levels of treatment.

Medical malpractice insurance costs have risen. However, the responsibility lies with poor management decisions, not an increase in malpractice awards. The percentage of victorious malpractice plaintiffs has actually dropped in the last 10 years. Moreover, according to the Consumer Federation of America, the average for payments by insurance companies has remained virtually unchanged in the last decade. Finally, claims of excessive punitive damage awards have been discredited. Punitive damages are awarded in less than 3% of medical malpractice cases.

The most direct cause for increased medical malpractice costs can be traced to poor management decisions by the insurance companies. Their profits have fallen dramatically with lower interest rates, resulting in a lower return on investments by these companies. This means that companies have reduced assets to cover policies.

These policies are also part of the problem. In the 1990s, insurance companies recklessly engaged in a price war to gain new market shares. When these artificially low-priced policies became due for the companies, their other investments were tanking in the market. This resulted in major bankruptcies.

The real costs of these poor decisions will be borne by victims of malpractice, not doctors, who still average more than $200,000 a year in salary (with many banking more than a million a year). Consider California’s malpractice cap. This 1975 law “solved” a malpractice crisis by refusing to compensate victims to the full extent of their pain and suffering awards. However, the $250,000 cap has never been adjusted for inflation. If it were adjusted, it would be roughly $840,000 today.

Yet the Bush administration wants to use the 1975 figure. In 2001 dollars, the real value of the maximum award is only $72,385. The only public policy achievement of the caps in California is to make it cheaper to injure or kill Californians.

There is a need for a public debate on rising insurance costs and the instability of this important industry. However, the solution is not to have injured people subsidize medical profit margins or to yield to medical blackmail.

These latest walkouts are nothing short of hostage-taking: demanding huge benefits in exchange for basic medical care for captive patients. We have long followed a policy of not negotiating with hostage-takers; it shouldn’t matter whether they are from the SLA or the AMA.

Jonathan Turley
Los Angeles Times: January 6, 2003

8 thoughts on “Tort Reform and Legal Mythologies: Re-Examining Limits on Tort Actions and Damage Awards”

  1. Physicians, dentists, and other medical professionals are free citizens.

    If they are tired of the constant stress and fear of being sued even when providing standard of care, and if they find the long hours and utter dedication to their profession are no longer worth the declining compensation, then they have the right to walk away from that profession and seek something else.

    More and more are doing just that.

    And if they seek to improve their plight before they abandon the calling of their lives, they have that right as well.

    To accuse them of engaging in “medical terrorism” is a rhetorical flourish worthy of a blogging terrorist.

  2. Anytime, binx.

    I enjoyed listening to him speak about what has to be the very near future, and also to his remarks at the end.

  3. I posted this CSPAN link before.

    If you didn’t see the program it’s worth the hour. Denis Cortese, M.D. is President and CEO of Mayo Clinic and makes a strong case for how to approach having a health care system that actually works in the US.

    Dr. Denis Cortese talked about the problems with the current health care system in America and how it should be overhauled. He talked about the different components that make up a functioning health care system, what the goals of that system should be, and how they can be achieved. Following his prepared remarks he answered questions from members of the audience.
    National Press Club – Luncheon Speech

  4. Fraus omnia vitiat

    Fraud vitiates everything — Including sovereign immunity and the defense of state secrets….

    “Although they have been refused in the “ordinary” fraud and deceit case ( Oehlhof v. Solomon, 73 App. Div. 329, 334, supra), we are persuaded that, on the basis of analogy, reason [**499] and principle, there may be a recovery of exemplary damages in fraud and deceit actions where the fraud, aimed at the public generally, is gross and involves high moral culpability. And this court has — in line with what appears to be the weight of authority (see, e.g., Bell v. Preferred Life Soc., 320 U.S. 238; Day v. Woodworth, 13 How. [54 U.S.] 363, 371; Greene v. Keithley, 86 F. 2d 238, 241; Laughlin v. Hopkinson, 292 Ill. 80; Whitehead v. Allen, 63 N. M. 63; Saberton v. Greenwald, 146 Ohio St. 414; Craig v. Spitzer Motors, 109 Ohio App. 376; Ann., 165 A. L. R. 614) — sanctioned an award of such damages in a fraud and deceit case where the defendant’s conduct evinced a high degree of moral turpitude and demonstrated such wanton dishonesty as to imply a criminal indifference to civil obligations. (See Kujek v. Goldman, 150 N. Y. 176, supra; see, also, Hamilton v. Third Ave. R. R. Co., 53 N. Y. 25, 28, supra.)

    Walker v. Sheldon, 12 A D 2d 456, New York, (1961)

  5. “Punitive or exemplary damages have been allowed in cases where the wrong complained of is morally culpable, or is actuated by evil and reprehensible motives, not only to punish the defendant but to deter him, as well as others who might otherwise be so prompted, from indulging in similar conduct in the future. (See, e.g., Toomey v. Farley, 2 N Y 2d 71, 83; Krug v. Pitass, 162 N. Y. 154, 161; Hamilton v. Third Ave. R. R. Co., 53 N. Y. 25, 28; Oehlhof v. Solomon, 73 App. Div. 329, 333-334.) n1 Moreover, the possibility of an award of such damages may not infrequently induce the victim, otherwise unwilling to proceed because of the attendant trouble and expense, to take action against the wrongdoer. Indeed, such self-interest of the plaintiff has been characterized as “Perhaps the principal advantage” of sanctioning punitive damages because it “leads to the actual prosecution of the claim for punitive damages, where the same motive would often lead him to refrain from the trouble incident to appearing against the wrongdoer in criminal proceedings”.

    [i]Walker v. Sheldon[/i], 12 A D 2d 456; (1961)

  6. Perhaps if the US adopted a National Health Service approach as in the UK, the trough may disappear and the services would exponentially grow. The UK’s NHS is the 4th largest employer in the world. Less than 8% of the population uses medical insurance and private doctors in the UK in addition to NHS. (Yes I understand the tremendous difficulty in re-educating the brainwashed US electorate)

    If only the party being sued were the punished party – our current system would be fine. The fact is though, there are significant industries that have been built on the backs of the American working public. Just check out the living Trail Lawyers, Inc makes out of Medical Malpractice. So as the article points out … insurance companies are complicit, however predatory legal practitioners have been partners in this death spiral of reason and good-will.

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