Opinion: Why Tort Reform Won't Solve the Healthcare Cost Crisis

An alternative to the Affordable Care Act that gets brought up consistently is tort reform, which the packaging and branding geniuses at the GOP are now calling “lawsuit abuse reform.” One of their foundational beliefs is that the reason health care costs are so high is because they think that your average doctor can’t walk out to his mailbox without getting sued for millions of dollars.

Their solution to this dilemma is to place limitations on how much victims of medical malpractice can receive in compensation. These are the so-called “damage caps” that you might have heard of. One of the reasons that these caps are so popular with the general public is because they put a limit on the amount of money people can receive for non-economic damages.

Non-economic damages have a lot of other names, and almost all of them are designed to make us angry. “Pain and suffering” is one. “Emotional distress” is another. Non-economic damages have been very easy to limit via state ballot initiatives, mainly because when Americans hear about somebody winning a lawsuit and receiving money for “pain and suffering” we immediately think “Suck it up, walk it off, and quit being such a baby.”

The theory behind caps is that if you limit the amount of money that doctors (and by extension their malpractice insurance companies) have to pay out if they lose a medical malpractice case, then all of these wonderful, cost-shredding dominos will start to fall. The doctors won’t have to shell out so much money for their malpractice premiums, and they won’t have to give up their medical practices and evacuate their respective states, and they won’t have to run an MRI and thirty X-rays over a sprained ankle to protect themselves, and they won’t have to charge their patients so much for health care, and the prices will go down, and everything will be right with the world.

It’s a terrific plan, except for the fact that it’s a terrible plan. If you want to see how these sorts of things work out for everybody, you should take a look at Texas, which is the state with the hardest restrictions on medical malpractice lawsuits in the country.

In 2003, Governor Rick Perry signed a hard cap of $250,000 for non-economic damages into law. None of the promised miracles of this law have really panned out.

One of the more optimistic predictions was that doctors would simply stampede to Texas in order to set up practice thanks to Governor Perry’s legal protections. But the latest info from the American Association of Medical Colleges has Texas ranking 42nd in the country in doctors per 100,000 people. If Texas is such a safe haven for doctors, then surely they can do better than that - 202 doctors per 100,000 people is a significantly lower ratio of practicing physicians than Rhode Island (ranked 4th), Vermont (ranked 6th), Connecticut (ranked 5th), and New Hampshire (ranked 11th) Each of these states have much lower populations and, interestingly enough, no limits whatsoever on non-economic damages in medical malpractice cases.

Also torpedoed by the facts is the notion that tort reform causes health insurance premiums to drop. Between 2003 and 2010 the average price of a health insurance premium for an individual in Texas went up 46 percent, and the average price of a family health insurance plan in Texas went up 52 percent. As if that wasn’t enough of a sign that tort reform hasn’t helped make health care cheaper, Texas had one of the highest rates of uninsured people in the country in 2010. Thirty three percent of Texans between the ages of 19 and 64 had no health insurance, and 17 percent of Texans between the ages of just-got-here to 18 weren’t covered either. Dallas, 33.1 percent, no coverage. Houston, 30 percent, nothing. San Antonio, 22.4 percent, nada. Seven years of caps on non-economic damages had no positive effect on either the costs of health insurance or the number of people who could afford it.

Since doctors in Texas are now free from expensive medical malpractice suits, it would stand to reason that they no longer have to practice what is called “defensive medicine,” which is the running of unnecessary and expensive tests for no valid medical reason other than fear of a lawsuit.

Yet in McAllen, Texas, Medicare costs per person are actually higher than the median income of the people who live there. While doctors might no longer fear lawsuits, it seems they are also not at all afraid of sending big, fat, test-laden invoices to Uncle Sam or insurance companies. It doesn’t seem to be “defensive medicine” as much as it is an amendment to the Hippocratic Oath: “First, do no harm. Second, daddy needs a new pair of shoes.”

It is absolutely true that medical malpractice cases have dropped drastically in Texas, but doctors and surgeons are making just as many mistakes as they always have. It’s just that now most of the victims have been priced out of the courtroom. Just as it costs money to defend a medical malpractice case, it costs money to be a plaintiff in one. Due diligence, depositions, and the hiring of expert witnesses is an expensive business. It costs money that I don’t have, and neither do you.

A guy working at Outback Steakhouse who gets injured due to a preventable mistake by a doctor can’t afford to pay the hourly rate of your average law firm. This is why the vast majority of medical malpractice attorneys work on a contingency basis. They front the costs of the trial with the agreement that if your case is successful, they will reimburse their expenses and take a percentage of what you are awarded.

If the case in unsuccessful, the attorney gets nothing and has lost the money that he spent getting your case through court. The idea that any sane attorney would gamble willy-nilly with his own money to pursue a frivolous lawsuit is absurd. You will never hear a plaintiff’s attorney who works on a contingency basis say “Sure, why not? Let’s just throw it out there and see what happens.”

As much as we make fun of the idea of “emotional distress,” those non-economic damages are how the middle and lower classes are able to pay for legal representation. With damage caps in place, all the medical malpractice insurance companies have to do is get the plaintiff’s attorneys to spend more litigating the case than they can possibly win, which is remarkably easy to do when the cap is as low as it is in Texas.

You hire two expert witnesses, they hire five. You schedule three depositions, they schedule ten, and so on and so on. The end result is that your attorney will end up losing money even if he wins the case, so most medical malpractice cases in Texas are dead before they start.

This is not to say that there are no medical malpractice cases in Texas. There are a few, usually with cases involving victims who were earning a significant amount of money before the doctor or surgeon made his mistake. If the Texas Rangers’ pitching phenom Yu Darvish got accidentally blinded during laser eye surgery, the economic damages alone would guarantee an avalanche of medical malpractice attorneys offering their services. But if the same thing happens to a woman who teaches at an elementary school, nobody is taking her case. The economic damages for a mere teacher probably wouldn’t cover the restrictions of the caps.

So aside from not delivering any of the cost slashing benefits that were promised, tort reform in the Lone Star State has given its citizens a new state motto. “Texas: If you aren’t worth something, then you aren’t worth anything.”