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Reforming Medical Liability Conventional Approaches and Beyond Randall R. Bovbjerg, J.D. (Bó - berg) The Urban Institute † † Standard disclaimer applies.

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Presentation on theme: "Reforming Medical Liability Conventional Approaches and Beyond Randall R. Bovbjerg, J.D. (Bó - berg) The Urban Institute † † Standard disclaimer applies."— Presentation transcript:

1 Reforming Medical Liability Conventional Approaches and Beyond Randall R. Bovbjerg, J.D. (Bó - berg) The Urban Institute † † Standard disclaimer applies

2 Bovbjerg # 1

3 Bovbjerg # 2 Who’s Missing? Patients Patients Payers Payers

4 Bovbjerg # 3 “Road Map” of Talk A bit of history A bit of history Problems today: insurance “crisis,” safety Problems today: insurance “crisis,” safety Causes and implications Causes and implications Conventional solutions, mainly tort reform Conventional solutions, mainly tort reform More fundamental changes to improve compensation and safety More fundamental changes to improve compensation and safety

5 Bovbjerg # 4 A Bit of History Series of crises that have changed industry Series of crises that have changed industry Two lesser known crises in 50s & 60s: rising claims, then better rating, medical society plans Two lesser known crises in 50s & 60s: rising claims, then better rating, medical society plans First national crisis in mid-70s: higher claims, availability problems, mutuals enter, tort reform First national crisis in mid-70s: higher claims, availability problems, mutuals enter, tort reform Second in mid-80s: higher claims, affordability, other lines too, shift to claims-made, tort reform Second in mid-80s: higher claims, affordability, other lines too, shift to claims-made, tort reform Third from Y2K: described below Third from Y2K: described below Regulation by states ― solvency & rates Regulation by states ― solvency & rates exception: Federal Risk Retention Act ‘81, ‘86. exception: Federal Risk Retention Act ‘81, ‘86.

6 Bovbjerg # 5 Latest Insurance Crisis Insurer withdrawal, retrenchment Insurer withdrawal, retrenchment Price increases and selective underwriting; varies by state Price increases and selective underwriting; varies by state Big for some MD’s, can’t pass through Big for some MD’s, can’t pass through Limited access problems ― high-risk providers in high-risk regions, perhaps long-term shifts Limited access problems ― high-risk providers in high-risk regions, perhaps long-term shifts

7 Bovbjerg # 6 Trends in Physician Premiums Source: CBO analysis of Med Liabil Mon surveys

8 Bovbjerg # 7 Factors Underlying Rise Lawyers say it’s all insurance cycle, interest rates and insurer misbehavior Lawyers say it’s all insurance cycle, interest rates and insurer misbehavior Doctors and insurers agree there’s cycle, but Doctors and insurers agree there’s cycle, but trend in claims payouts went up in mid-90s trend in claims payouts went up in mid-90s in some states, claims up in some states, claims up reinsurance up reinsurance up Both partly right, doctors/insurers more Both partly right, doctors/insurers more

9 Bovbjerg # 8 Crises: Cycles & Costs Underlying trend in “true” claims and other costs Superimposed price fluctuation from competitive cycle $$$ $$ $ Time

10 Bovbjerg # 9 Problems & Implications Main cost of malpractice insurance is malpractice claims [Duh] Main cost of malpractice insurance is malpractice claims [Duh] Interest earnings have effect because they’re a negative cost but don’t drive cycle Interest earnings have effect because they’re a negative cost but don’t drive cycle Crisis seems to be abating, not “normalcy” Crisis seems to be abating, not “normalcy” Big differences across States, even within State Big differences across States, even within State

11 Bovbjerg # 10 National Malpractice Costs Total Physicians Source: Tillinghast (2004) $ billions

12 Bovbjerg # 11 Potential Solutions Today’s top three: tort reform, tort reform, and tort reform Today’s top three: tort reform, tort reform, and tort reform Insurance market interventions, other near-term reforms Insurance market interventions, other near-term reforms Broader reforms ― replace part or all of current liability system Broader reforms ― replace part or all of current liability system

13 Bovbjerg # 12 Conventional “Tort Reforms” Goals: insurance availability, affordability Goals: insurance availability, affordability Legal cutbacks Legal cutbacks Caps on awards, shorter times to sue, no double recovery, cut attorney fees, etc. Caps on awards, shorter times to sue, no double recovery, cut attorney fees, etc. Work to cut claims costs, also premiums; calms insurance markets (somewhat) Work to cut claims costs, also premiums; calms insurance markets (somewhat) As “takeaways,” face challenges in court As “takeaways,” face challenges in court Improve insurance performance Improve insurance performance Sometimes add quality or safety regulation Sometimes add quality or safety regulation

14 Bovbjerg # 13 Caps Are Centerpiece Design  total award, only “pain and suffering” Design  total award, only “pain and suffering” Doctors  only caps are more than “band-aids” Doctors  only caps are more than “band-aids” Lawyers  unconstitutional, the worst hurt are hurt worst Lawyers  unconstitutional, the worst hurt are hurt worst Insurers  like caps, trade premium volume for claims predictability Insurers  like caps, trade premium volume for claims predictability Scorecard  in about 1/2 of States, push for national Scorecard  in about 1/2 of States, push for national

15 Bovbjerg # 14 California MICRA & Federal Bills Other provisions Periodic payments Periodic payments Sliding scale for attorney fees Sliding scale for attorney fees Multiple defendants pay by percentage of responsibility Multiple defendants pay by percentage of responsibility CA CA 90-day notice of claim, physician discipline 90-day notice of claim, physician discipline Federal Federal Punitive damage limits, drug/device provisions, asbestos reforms, class action reform Punitive damage limits, drug/device provisions, asbestos reforms, class action reform “Big three” $250K cap on pain & suffering $250K cap on pain & suffering Collateral source offset Collateral source offset Shorter time to sue Shorter time to sue MICRA = Medical Injury Compensation Reform Act of 1975 Federal, HR 4600 & successors, administration proposals N.B. Federal bill would alter traditional Federal/State roles in this field

16 Bovbjerg # 15 Insurance Changes ― Public Regulation/antitrust (lawyers’ preferences) Regulation/antitrust (lawyers’ preferences) State provision of insurance State provision of insurance Insurer of last resort ― Joint Underwriting Association Insurer of last resort ― Joint Underwriting Association High-end risk ― Patient Compensation Fund or reinsurance High-end risk ― Patient Compensation Fund or reinsurance Some subsidies of physician premiums Some subsidies of physician premiums Old NY requirement that hospitals provide top layer Old NY requirement that hospitals provide top layer PA for catastrophic coverage PA for catastrophic coverage MD subsidy ― ended HMOs exemption from premium tax MD subsidy ― ended HMOs exemption from premium tax

17 Bovbjerg # 16 Insurance Changes - Private Alternative Risk Mechanisms (ARMs) Alternative Risk Mechanisms (ARMs) Mainly hospitals, seem more common this crisis Mainly hospitals, seem more common this crisis Hospital-physician collaboration Hospital-physician collaboration May subsidize rates ― stark issues May subsidize rates ― stark issues “Channeling” programs at academic medical centers “Channeling” programs at academic medical centers Broader hospital-physician collaboration could: Broader hospital-physician collaboration could: Create new risk pool, with positive attributes Create new risk pool, with positive attributes Save on investigation, defense Save on investigation, defense Prompt new mode of cooperation on safety Prompt new mode of cooperation on safety Multistate arrangements? Multistate arrangements?

18 Bovbjerg # 17 What’s Missing? More even-handedness, not just takeaways More even-handedness, not just takeaways Major underperformance of law’s 3 key goals: Major underperformance of law’s 3 key goals: Compensation Compensation Deterrence Deterrence Justice Justice These are persistent problems, not crises These are persistent problems, not crises Hereafter, possible alternatives to CA’s MICRA and proposed national mega-MICRA Hereafter, possible alternatives to CA’s MICRA and proposed national mega-MICRA

19 Bovbjerg # 18 Key Goal 1: Fairer Compensation “It’s a treasure map”

20 Bovbjerg # 19 Key Goal 2: Better “Signals”/Safety “It’s from my attorney.”

21 Bovbjerg # 20 Five Alternatives Akin to conventional reform Akin to conventional reform More even-handed liability reforms More even-handed liability reforms Broader reforms, aim at all medical injuries Broader reforms, aim at all medical injuries Radical disclosure, full “transparency” Radical disclosure, full “transparency” Reward (only) disclosure with tort reform Reward (only) disclosure with tort reform Trial run for administrative compensation system Trial run for administrative compensation system Create advance lists of “avoidable classes of events” Create advance lists of “avoidable classes of events”

22 Bovbjerg # More Even-Handedness Within current system Within current system Improve liability process, not just prospects for one party or other Improve liability process, not just prospects for one party or other Address specific problems Address specific problems Unpredictable/inaccurate liability determinations Unpredictable/inaccurate liability determinations Unpredictable payouts, not just intangibles but also future “economic” losses, discount rates Unpredictable payouts, not just intangibles but also future “economic” losses, discount rates

23 Bovbjerg # 22 Elements of Improvement Expert witnesses Expert witnesses Not just “tighter” qualifications (e.g., <20% of income) but also availability, objectivity Not just “tighter” qualifications (e.g., <20% of income) but also availability, objectivity Evidence-based medicine? Evidence-based medicine? Caps other than flat, one-size-fits-all Caps other than flat, one-size-fits-all “Stacked” caps, sliding scales, or ranges “Stacked” caps, sliding scales, or ranges Routinize elements of future loss determinations Routinize elements of future loss determinations Improve legal performance Improve legal performance More active judicial management, tracking of data (timeliness, costs, awards, lawyers’ performance) More active judicial management, tracking of data (timeliness, costs, awards, lawyers’ performance)

24 Bovbjerg # 23 Why Do More Than This? Tap into new capabilities in “patient safety” Tap into new capabilities in “patient safety” Fix the problem, not the blame Fix the problem, not the blame Regulation, punishment can help, but fall short Regulation, punishment can help, but fall short “Surface” problems, analyze, change processes, monitor, repeat “Surface” problems, analyze, change processes, monitor, repeat Early successes in medicine Early successes in medicine BUT fear of blame and liability keeps problems hidden (and claims, too) BUT fear of blame and liability keeps problems hidden (and claims, too)

25 Bovbjerg # Greater Transparency More “transparent” disclosure to patients More “transparent” disclosure to patients Risks before the fact, unanticipated outcomes after Risks before the fact, unanticipated outcomes after Remediation, settlement offer Remediation, settlement offer Motivations Motivations Treat patients ethically Treat patients ethically Improve trust, cut litigiousness Improve trust, cut litigiousness Ease providers’ malpractice fears Ease providers’ malpractice fears Facilitate systemic improvements Facilitate systemic improvements

26 Bovbjerg # 25 Greater Transparency, cont’d Many saying this should happen, including AMA, Joint Commission on Accreditation of Healthcare Organization Many saying this should happen, including AMA, Joint Commission on Accreditation of Healthcare Organization Actual practice less clear, many say they do Actual practice less clear, many say they do May be good business/liability strategy May be good business/liability strategy Some indication from VA that it’s fiscally feasible Some indication from VA that it’s fiscally feasible Increasingly becoming conventional wisdom Increasingly becoming conventional wisdom May help safety analysis, too May help safety analysis, too Fears may linger Fears may linger

27 Bovbjerg # Early-Offer Reform Defendants promptly offering to pay future out- of-pocket losses cannot be sued for pain and suffering Defendants promptly offering to pay future out- of-pocket losses cannot be sued for pain and suffering Pluses Pluses Rewards fast disclosure, potentially increases ## Rewards fast disclosure, potentially increases ## Much faster and lower overhead Much faster and lower overhead Assures funds for future needs Assures funds for future needs No complex changes to law or liability insurance No complex changes to law or liability insurance Minuses Minuses May be “gamed” ― only offer for big cases May be “gamed” ― only offer for big cases Lawyers hate, insurers uneasy about ongoing risk Lawyers hate, insurers uneasy about ongoing risk

28 Bovbjerg # 27 New Systems “We would like to request a change in venue to an entirely different legal system.”

29 Bovbjerg # Administrative Compensation Cover preventable injuries (not full “no fault”), control payouts Cover preventable injuries (not full “no fault”), control payouts Similar to Workers Compensation, other nations Similar to Workers Compensation, other nations Pluses Pluses Fiscal incentives for safety practices, data Fiscal incentives for safety practices, data High speed, low overhead, more consistency High speed, low overhead, more consistency Minuses Minuses Hard to legislate as good package ― cf. no-fault auto Hard to legislate as good package ― cf. no-fault auto Still dependent on claims brought by patients Still dependent on claims brought by patients Not well-grounded in operations of medical entities Not well-grounded in operations of medical entities

30 Bovbjerg # 29 Admin Comp, cont’d Evidence from VA and FL birth-related neurological injury compensation Evidence from VA and FL birth-related neurological injury compensation Successes: Successes: feasible to run program with one listed event feasible to run program with one listed event maintained access to obstetrician liability insurance maintained access to obstetrician liability insurance cut OBs’ premiums 2.5 times below trend cut OBs’ premiums 2.5 times below trend settles in 1/3 time, 1/5 the administrative costs settles in 1/3 time, 1/5 the administrative costs comparable compensation, satisfaction comparable compensation, satisfaction But: But: too small, some variability in application too small, some variability in application political and legal attacks political and legal attacks

31 Bovbjerg # ACEs & Provider Groups List preventable injuries in advance as ACEs (avoidable classes of events) List preventable injuries in advance as ACEs (avoidable classes of events) Pay structured damages automatically, like disability insurance, without liability process Pay structured damages automatically, like disability insurance, without liability process Resolve disputes, other cases through nonjudicial process Resolve disputes, other cases through nonjudicial process

32 Bovbjerg # 31 ACEs, cont’d Implement through private contract Implement through private contract provider-patient contracts provider-patient contracts employer/health plan-enrollee contract (akin to Kaiser mandated arbitration but with new rules) employer/health plan-enrollee contract (akin to Kaiser mandated arbitration but with new rules) potential for choice at time of service, PPO model potential for choice at time of service, PPO model Nature of oversight an open issue (sanctioned by State, in IOM model) Nature of oversight an open issue (sanctioned by State, in IOM model) Could also be used to promote case-finding, resolution under other reforms Could also be used to promote case-finding, resolution under other reforms

33 Bovbjerg # 32 ACEs, cont’d Evidence from research Evidence from research listings are feasible listings are feasible would cover a lot of current system (1/2 hospital OB cases but 3/4 of $$) would cover a lot of current system (1/2 hospital OB cases but 3/4 of $$) Potential is great but unproven; need demonstration in willing locale Potential is great but unproven; need demonstration in willing locale

34 Bovbjerg # 33 Need State Experimentation Proposed November 2002 in IOM report to DHHS Proposed November 2002 in IOM report to DHHS Nonjudicial, patient-centered, safety-friendly new injury resolution system Nonjudicial, patient-centered, safety-friendly new injury resolution system Federal liability reinsurance to encourage State action (cover very high level of losses) Federal liability reinsurance to encourage State action (cover very high level of losses) State legislation to try one of two approaches (akin to 4 & 5 above) State legislation to try one of two approaches (akin to 4 & 5 above)

35 Bovbjerg # 34 Summing Up In short term, be more even handed In short term, be more even handed In medium and long run, try more promising approaches, support demos In medium and long run, try more promising approaches, support demos Key standards throughout Key standards throughout Fairer compensation Fairer compensation Better safety Better safety

36 Bovbjerg # 35 Final Thought Ideally, caregivers would tell patients and families when problems occur. Reasonable compensation would follow for avoidable injuries, and safety management would constantly be informed by experience. Patients treated decently are mainly grateful, not vengeful. Practitioners need to worry more about patient outcomes than legal outcomes, and systems of accountability need to make it easier for caregivers and medical institutions to do the right thing.

37 Bovbjerg # 36 End Questions

38 Bovbjerg # 37 $$$ $ MinorSevere Level of injury MinorSevere Sliding Scale in Lieu of Cap “Pain & Suffering” Reform “Traditional” Flat CapSliding Scale Source: Author's schematic


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