Health Economics & Health Economics & PolicyPolicy33rdrd Edition Edition

James W. HendersonJames W. Henderson

Chapter 12Chapter 12

The Legal System and Medical The Legal System and Medical MalpracticeMalpractice

Tort Law in the United Tort Law in the United StatesStates

Basis in English common lawBasis in English common law Development in the U.S.Development in the U.S.

Purpose of Tort LawPurpose of Tort Law

CompensationCompensation DeterrenceDeterrence RetributionRetribution

Medical MalpracticeMedical Malpractice

Frequency of claimsFrequency of claims Severity of claimsSeverity of claims International differencesInternational differences

Claims Frequency by Claims Frequency by SpecialtySpecialty

Date

All Physicians

General/ Family

Practice

Internal Medicine

Surgery Obstetrics/ Gynecology

Radiology

1985 10.2 5.7 6.2 16.8 25.8 12.8 1986 9.2 7.6 5.5 15.8 13.0 11.5 1987 6.7 5.7 4.5 12.7 8.0 8.0 1988 6.4 6.2 4.3 10.2 15.1 5.2 1989 7.4 6.6 5.9 11.2 13.5 5.0 1990 7.7 5.9 6.2 11.5 11.9 8.7 1991 8.2 5.7 5.5 14.0 11.6 6.1 1992 9.1 6.9 7.3 15.5 15.6 11.5 1993 9.8 7.1 7.9 18.9 22.5 9.4 1994 9.5 6.7 5.7 16.9 19.2 10.5 1995 9.0 6.2 5.7 14.9 20.9 11.0 1996 9.0 6.7 5.3 14.9 13.1 16.8

Source: Martin L. Gonzalez, “Medical Professional Liability and Claims,” Socioeconomic Characteristics of Medical Practice, Chicago: American Medical Association, various years.

Severity of Medical Severity of Medical InjuriesInjuries

CMA Study1 Harvard Study2

Severity of injury Negligent injuries

Non-negligent injuries

Total injuries

Negligent injuries

Non-negligent injuries

Total injuries

Minor temporary disability 6.1 55.4 61.5 12.6 44.2 56.8 Major temporary disability 3.4 15.2 18.6 3.3 10.4 13.7 Minor permanent disability 1.6 5.0 6.6 0.8 2.0 2.8 Major permanent disability 1.3 1.8 3.1 0.9 3.0 3.9 Grave permanent disability 0.5 0.1 0.6 0.9 1.7 2.6 Death 4.1 5.5 9.6 7.0 6.6 13.6 Unknown - - - 2.0 4.6 6.6 Total 17.0 83.0 100.00 27.6 72.4 100.0 1. Patricia Danzon, Medical Malpractice: Theory, Evidence, and Public Policy, 1985. 2. Troyen A. Brennan, et al., “Incidence of Adverse Events and Negligence in Hospitalized Patients: Results of the Harvard Medical Practice Study I,” The New England Journal of Medicine 324(6), February 7, 1991, Table 2.

Tort ReformTort Reform

Cost of malpracticeCost of malpractice Causes of increased litigationCauses of increased litigation

Malpractice Premiums Malpractice Premiums by Specialtyby Specialty

Year All

Physicians

General/ Family

Practice

Internal Medicine

Surgery

Obstetrics/ Gynecology

Anesthesiology

1982 7.4 4.6 4.9 9.5 10.0 20.4 1985 10.2 7.0 6.4 12.2 17.8 22.0 1986 10.8 6.1 6.4 14.3 19.6 21.2 1987 12.1 7.3 7.1 14.9 20.4 30.6 1988 11.3 7.7 6.6 14.1 18.6 24.7 1989 10.4 7.0 5.9 12.7 18.7 24.0 1990 9.7 5.8 6.6 11.3 16.1 23.4 1991 8.7 5.5 5.0 10.4 14.8 20.4 1992 7.6 5.2 4.9 8.6 14.3 17.5 1993 7.9 4.9 4.9 9.2 14.2 16.6 1994 8.2 5.4 4.6 8.9 19.0 17.3 1995 7.4 5.0 4.7 8.8 14.4 15.3 1996 6.5 4.0 4.6 7.1 13.2 10.3 1997 6.2 5.8 3.9 6.3 10.8 9.9 1998 6.4 4.1 6.4 7.0 9.5 -

Source: Martin L. Gonzalez, ed., Socioeconomic Characteristics of Medical Practice, Chicago: American Medical Association, various years.

Causes of Increased Causes of Increased LitigationLitigation

Increased supply of lawyersIncreased supply of lawyers Increased litigiousness in USIncreased litigiousness in US Increased medical cost and physicians’ Increased medical cost and physicians’

salariessalaries Breakdown of physician-patient Breakdown of physician-patient

relationshiprelationship Pro plaintiff trend in common law doctrinePro plaintiff trend in common law doctrine Size of damage awardsSize of damage awards Increased technology in medicineIncreased technology in medicine

Rent-seeking BehaviorRent-seeking Behavior

D

Rent

Quantity

Price

P’

P P

P’

Lost surplus

Q D 0 Q’

Suggestions for ReformSuggestions for Reform Caps on noneconomic damagesCaps on noneconomic damages Awards adjusted for collateral sourcesAwards adjusted for collateral sources Periodic payment mechanismPeriodic payment mechanism Limits on punitive damagesLimits on punitive damages Changes in certain rulesChanges in certain rules Establish ADR mechanismEstablish ADR mechanism Limits on contingency feesLimits on contingency fees Establish English rule of costsEstablish English rule of costs Establish medical courts to hear all medical Establish medical courts to hear all medical

malpractice casesmalpractice cases

Summary and Summary and ConclusionsConclusions

Does the current system fulfill its Does the current system fulfill its objectives?objectives?

Too many lawsuits?Too many lawsuits? Too few?Too few? Is it worth the trouble? Is it worth the trouble? Is there a better way?Is there a better way?