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July 05, 2004 Tort Reform Unfortunately, I'm insufficiently versed in the details of Tort Reform to form an educated opinion, so I'm remaining agnostic about the whole thing. Proponents of tort reform claim it will lower the cost of health care, as it eliminates spurious lawsuits and awards. Critics of tort reform claim it won't really lower insurance premiums, as they aren't really connected to those payouts, and it hasn't lowered them in states where it has been tried. The answer? Well, I don't know. However, some economic basics occur to me. Clearly, high lawsuit payouts do represent costs. What we don't know, though, is whether those payouts represent a legitimate cost directly related to the action being done--say, for example, surgery--or whether they represent illegitimate costs...i.e., wrongfully filed and won lawsuits that do not result from harm done. If there is genuine malpractice, then a lawsuit payout does not represent a higher cost - it represents a transfer to cover costs incurred. It is no more illegitimate than a payment for use of an X-Ray machine. On the other hand, frivolous lawsuits create a cost where there is none inherent in the action being taken. It is an externality - a cost external to the process. These costs add to the price, and cost, of health care in a very negative way. Now, with that said, from an economic perspective lawsuits can do one of three things: 1: Raise prices for goods and services, lowering demand. (i.e., people can buy/want to buy less healthcare, for example) Clearly, opponents of tort reform want #3 to happen, and believe it is happening. That's good for the individual consumer, and--generally speaking--society, too. It represents a reduction in the cost of healthcare. Proponents of tort reform believe #1 and #2 is happening. Those are bad for the consumer, since they deprive consumers of options. I'd say it's pretty obvious that the reality is a mix of the three. In fact, any argument to the contrary would require a wholesale reexamination of the laws of economics. So, what's the answer? I don't know. Tort reform is, to me, a pretty open question. Lawsuits are both a valuable and a dangerous tool. No resolution is entirely without costs, and I have very little faith in the government to legislate an improvement. So, I don't know, but I'm pretty sure I don't trust the proponents to "fix it", and I don't trust the critics when they tell us it doesn't need fixed. |
Yeah, #3 is definitely happening, but it isn't beneficial at all to the consumer. We can see it in the fact that fewer and fewer OBGYN's are delivering babies.
Obstetrics is one of the most sued branches of medicine. Women sue for the most outrageous things-- for example, shoulder dystocia, a condition in which the baby fails to pick a shoulder to present first and gets "stuck" on the way out. (The baby can still be safely delivered by breaking the collarbone, which later heals.) Women even sue doctors that weren't their doctor, just because they happened to be on call at the time that they came in to deliver, for conditions that could have been prevented had the woman sought proper prenatal care. Since there is little that OB's can do to reduce the incidence of shoulder dystocia or make women receive prenatal care, the easiest way out of this mess for individual doctors is to just quit delivering babies. If they don't deliver babies, they reduce the proximate cause of the lawsuits, which is simply the natural risk inherent in delivering babies.
And when malpractice insurance to cover the costs of this insanity can cost $300,000 a year, who can blame them? I recently heard on the radio that to break even an OB would have to deliver something on the order of 120-150 babies a year, which is enough of a load to push a person to the point where exhaustion clouds their judgement and they start actually committing malpractice.
Surely you can't argue that this represents a beneficial reduction in the cost of health care.
Posted by: Wacky Hermit at July 5, 2004 09:41 AM
It isn't just the lawsuits directly that generate costs. Physicians order tests that should be limited to high risk populations on much broader populations. They run those tests because every once in a very long while someone without symptoms has the condition and to save themselves millions in payouts for the resultant malpractice suit, doctors collectively order tests that total even more in costs for society at large.
Skills in simple, basic medicine also atrophy. Doctors in the US are awfully bad at using their stethoscopes and that's in part because ordering the newest and most expensive tests routinely is a form of lawsuit protection. If you don't use your ears to listen, you'll lose your skills and if you train in a stethoscope unfriendly environment you might never even get those skills.
Poor tort systems have all sorts of unusual and odd effects, mostly bad ones. The system needs to change, the sooner, the better.
Posted by: TM Lutas at July 6, 2004 10:08 AM