March
3, 2003
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Note:
A transcript and streaming video of the conference sessions are
available through the HealthCast network of Kaisernetwork.org.
The conference session webcast and transcript can be accessed by clicking here. |
Papers:
Presentations:
Stuart Altman (Chair, Council on Health Care Economics and Policy) reminded us that malpractice crises are not new and have occurred more than a few times. However, he cautioned that this might be a different type of crisis. There have been substantial increases in malpractice insurance premium rates for some, though this varies by geography and specialty.
What is causing premium rate hikes? Is it the insurance cycle? Is this merely the result of the health care inflation cycle? Are premiums going up, as the insurance industry tells us, or are inflation-adjusted premiums going down on a per doctor basis, as to patient advocacy groups and trial lawyers maintain? Are losses going up or staying the same?
Altman ended with the question for the day: should we try to fix the immediate problems with our existing malpractice system, or should systemic reforms be implemented to address the problems of medical errors and injured patient compensation?
William Sage (Professor of Law at Columbia University): proposed that the current malpractice crisis is different than those of the past. Both the insurance industry and the legal profession have been driven by changes in the health care system and, since the Institute of Medicine report “To Err is Human,” patients have become more aware of errors and more willing to file suit.
Sage noted that most injured patients receive no compensation. Yet high malpractice premiums reflect the higher cost of health care. Today, doctors are sued for “failure to diagnose” because medicine is able to rescue patients even in advanced disease states. This changes the nature of the suit from a “wrongful death” claim to an expensive claim for life-time, high-intensity care. Also, the industrialization of health care has resulted in more corporate organizations involved in the business of health care, resulting in more targets for lawsuits. As the share of medical spending attributed to physician services as declined substantially, Sage reasoned that doctors should not still be responsible for the vast majority of liability costs.
Yet in an era of cost containment on the part of patients and their HMOs, it is increasingly difficult for physicians to pay for malpractice insurance premiums, and access to health care is threatened and must be taken seriously. Sage made the following recommendations:
Council Responses:
Paul Ginsburg noted that the increase in premiums has placed a stress on the system. Physicians are responding because their revenue is down. He worried that the issues are fought out between strong vested interests and stakeholders, and health care policy analysts’ impact is diminished in the debate.
Karen Davis offered that malpractice should be considered within the context of safety improvement, since this is the larger problem and must be part of the discussion. We can learn, both nationally and internationally, about how to reduce errors through widespread reporting, involvement of institutions within the health care system and implementation of IT systems.
She suggested that the federal government could assume the liability insurance costs for Medicare, Medicaid and SCHIP beneficiaries for physicians caring for these patients. HMOs and other health insurance plans should create similar strategies. She stated that we must move beyond the image of the bad doctor and toward a systems approach to decreasing errors and improving quality.
Discussion
Henry Aaron distinguished among four types of potential malpractice suits:
He asked how does the current system account for these different types of cases?
Kenneth Thorpe (Robert W. Woodruff Professor and Chair, Rollins School of Public Health, Emory University) began by describing the financial situation of malpractice insurers. Premiums increases vary substantially among markets. Nationally, 15% of medical malpractice insurance carriers have left the market. Over the last three years, there has been a large increase in the loss ratios for insurance carriers. Investment returns have decreased, since 85% – 95% of investments are in bonds and interest rates have declined, and there are setbacks facing the reinsurance market.
Indemnity payments and settlements have doubled over the past 10 years. In general, there are rising costs for health care as patient mix changes. The actuarial rate-setting process is one of looking at the past to try to predict the future, taking past trends and pushing them forward. Predicting what a premium should be next year is complex, since it may be ten years between the filing of a claim and final payment.
Stopgap solutions that have been proposed include:
Thorpe suggested that increasing the underwriting capacity would help reduce premiums, and that placing caps on awards may help somewhat. However, litigation is not and effective method to improve patient safety. He hoped we can identify alternatives that would increase patient safety and decrease costs.
Robert Hunter (Director of Insurance, Consumer Federation of America) began by point out that the medical liability insurance crisis is not a new issue. Since the crisis in 1975, data have been collected on insurance cycles and insurance premiums. The cycle of premium increases is related to the economic cycle of the country. Paid losses per doctor to attorneys and victims have been fairly constant since 1985, after adjusting for inflation.
Many victims of medical errors do not receive any compensation. He suggested a no-fault system should be considered, rather than react during a crisis. He suggested that solutions may be more costly than the current system, and that tort reform does not always bring desired results. All physicians bear the costs, but for high-risk specialties, huge premium increases are a burden. Caps on damages may be one solution, but what is the quid pro quo for patients who are giving up a legal right? Hunter ended by saying that a careful analysis of the system is needed to decrease inefficiencies and to ensure compensation for those who need it.
Council Responses
Nancy Dickey reminded us that we have a “perfect storm” today that includes some of the following warning signs: communication is diminished between physicians and their patients related to increasing subspecialization, increased volume, and decreased trust; patients have increased expectations, and because there is no primary care base in this country, there is no one person to go to for redress; HMOs have fostered a belief that a “white coat is a white coat is a white coat,” no matter who it is, which increases the possibility for error; there are currently no incentives in place for doctors to do better and report errors; there is no incentive for hospitals to fight surgeons who do not want to participate in safety initiatives; volume increases as payment decreases, jeopardizing quality; and doctor discipline is not connected to the tort system, so many of those who are injured do not bring claims, while those with no preventable injury often do bring claims.
Dickey ended by saying that we need to do something to help high-risk specialties and incentives to improve the quality of care. She hoped we can advance longer-term solutions so as not to have this conversation again in two years.
Mark Pauly made the following observations:
Discussion
The observation was made that, if there were similar cycles in other areas of health care, like pharmaceuticals and health insurance coverage, the situation would be seen as serious. It was suggested that stricter regulation of malpractice insurance carriers might ensure larger reserves and limit increases in premiums. The loss ratios at a point in time are useless to determine what is driving the rates, and there is a need to know what the data are for a particular year and all claims paid for that year. To set up premiums, all payments over ten years are calculated and then put into the year in which the claim was filed. This is difficult.
Michelle Mello (Assistant Professor of Health Policy and Law, Harvard University) began by pointing out that there are really two crises: malpractice and medical error reduction. How is the tort system related to medical errors? The theory of deterrence would assume that doctors and hospitals engage in precaution-taking behavior, but the evidence does not bear this out. The Harvard Medical Practice Study found a weak correlation between claims and adverse events. Mello concluded that the tort system does not deter medical errors, and in fact may provide negative incentives. Reporting systems are not working, since states have been unable to convince doctors that they are safe. The doctor/patient relationship is strained and even on a hospital level, errors are not adequately reported.
Alternatives to tort reform that could make the medical justice system a vehicle to improve patient safety include focusing liability on the party best able to prevent error, protecting patient safety initiatives that are comfortable for doctors, and emphasizing accountability rather than liability.
Mello suggested a number of possible reforms, including using channeling to tie doctors with hospitals and others within an insurer’s panel; using experience rating; adding no-fault compensation, in which administrative costs are lower; and implementing a cap on damages that is sensitive to the level of injury. To increase the potential of improved patient safety, a comprehensive reform is needed.
Mello concluded with three thoughts:
John Horty (Horty, Springer & Mattern, P.C.) described community hospitals as being more than businesses, but rather “stand ready to” services for the purpose of serving those in need. In Pennsylvania, where there are limited malpractice insurance carriers and doctors have lost coverage, hospitals are trying to fill in and take over coverage in some cases, thereby creating a contractual relationship between the hospital and the doctor. Within these relationships, the hospital may have the ability to protect doctors from suit depending upon the malpractice insurance carrier.
Horty advised that there are no easy solutions to this problem: caps may or may not work, and the courts will try to find a way around this solution; the cap must apply to the doctor and the hospital: the most complicated and large verdicts occur in the hospital setting and the hospital will be held liable in some form; when a case goes to trial, the case is not brought to where it occurred, but rather to where the most generous jury awards are likely; if awards for pain and suffering are limited, then this will also limit the trying of cases; and we may end up with hospitals paying malpractice insurance premiums for doctors.
With regard to medical errors and patient safety, our fault system currently stands in the way of effective solutions. It is difficult to draft immunity provisions that are not weakened by the courts. Horty suggested that errors should not be made public: the National Practitioner Data Bank is difficult to keep private. Very careful drafting of bills is required.
David Blumenthal spoke of his own experience of being deposed recently. The current system is complex and there is a need for systemic change. Enterprise liability may not be sufficient incentive to change behavior. There is a need for public disclosure and the public needs information. The current system interferes with the process of learning from errors, and cannot take advantage of the opportunities created.
Stuart Butler made these observations:
He suggested that the problem not be federalized, since the states should be free to make their own decisions in this area. Caps on awards might save money but will not necessarily alter behavior. On the other hand, enterprise liability may be a more likely solution to improve patient safety particularly if the damage awards are known. Finally, he noted that there is sufficient uncertainty about the causes and solutions to encourage states to test possible resolutions to the crisis.
Discussion
It was observed that the current system is broken in that money is spread in strange ways. There is a need to resolve the issue of equity, and so perhaps the focus should be on the cost of medical malpractice insurance and compensation to victims.
The notion of “early offer” was suggested, in which an individual is offered an amount that compensates for the economic effects only, giving up the right to sue unless the offer is rejected. There is no trial and no record to denounce the physician or the hospital, but errors are made public. It was suggested that, if doctors were offered a reliable system without any limits, the reliable system would win.
Philip Howard (President of Common Good) began by introducing the goal of the organization: the restoration of common good that the litigation system has undermined. Caps on damages, he argued, will not change human behavior since the harm is the fear and distrust of the legal system. This fear has changed the culture of our society. In health care, this fear leads to a misallocation of resources in terms of defensive medicine, which will inevitably lead to fewer resources for those in need.
The legal system, he pointed out, has done little to prevent error or to offer protection. The capacity to make deliberate judgments on behalf of society has become a battle between special interests. The goal of the system should be protection of patients, not protection of doctors and lawyers. He did not advocate removing the right to sue, but rather to determine what is valid and what is not. Judgments should be made that apply to everyone, so that people know where they stand, with the freedom of knowing they will be protected if they do the right thing. This is a great opportunity to band together to create safety and to change the legal system.
Stuart Altman closed the meeting with these observations:
Summary prepared by Katharine Kranz Lewis and Brian P. Rosman