Monday, October 11, 2004

Debating Federal Tort Reform

Day Lily

In the second presidential debate between John Kerry and George Bush, the topic of medical malpractice reform was raised. Here's the exchange:




LAURENT: Senator Kerry, you've stated your concern for the rising cost of health care, yet you chose a vice presidential candidate who has made millions of dollars successfully suing medical professionals. How do you reconcile this with the voters?

KERRY: Very easily. John Edwards is the author of the Patients' Bill of Rights. He wanted to give people rights. John Edwards and I support tort reform. We both believe that, as lawyers — I'm a lawyer, too. And I believe that we will be able to get a fix that has alluded everybody else because we know how to do it...

Now, ladies and gentlemen, important to understand, the president and his friends try to make a big deal out of it. Is it a problem? Yes, it's a problem. Do we need to fix it, particularly for OGBYNs (sic) and for brain surgeons and others? Yes.

But it's less than 1 percent of the total cost of health care.


First of all, the mention of John Edwards' sponsorship (with Ted Kennedy and John McCain) of the Patients' Bill of Rights is a non-sequitur to the issue of the growing malpractice crisis: the Patients Bill of Rights addressed a patient's right to sue their HMO for denial of care, and also allows wronged patients to receive unlimited punitive damages in state court and awards in federal court of up to $5 million. As such, this bill is highly favorable to trial attorneys, and worsens the overall liability crisis. And it has nothing to do with medical malpractice. When the trial attorneys start talking "patients' rights", it's time to hold on to your wallet if you're in the health care industry. "And I believe that we will be able to get a fix that has alluded everybody else because we know how to do it". Hmmm, the fox knows how to solve the chicken-killing spree, because he knows how foxes get into the hen house. Somehow I'm not feeling reassured about this.

It would be interesting to see the origin of Kerry's "1 percent of the total cost of health care" figure. The John Kerry website white paper on malpractice reform does not mention this statistic, or give any references in support of it. I suspect this figure is inaccurate, and very low. And I'm not sure it's relevant anyway - as I'll detail below.

In the MedPAC report on medical liability costs, released in March 2002, physicians' medical malpractice premium costs were estimated to be 3.2% of revenue in 2001. The past 3 years have seen double-digit percentage increases in malpractice premiums for all physicians, along with reductions in revenue, making even the 3.2% figure woefully outdated.

In my practice - a relatively low-premium surgical subspecialty - malpractice premiums represent 10% of my expenses - exceeded only by rent and salaries - and about 6% of revenue. So in my practice, and that of many physicians, malpractice premiums are not yet devastating, although their inexorable and exponential rise adds substantially to the financial vise grip of growing expenses and dropping reimbursements. But rising expenses and declining income for physicians is not really the main problem, at least in the short term; the real problem is patient access.

The reason for this is twofold. First of all, malpractice premiums are not evenly distributed, but disproportionately affect some specialties far more than others. So talk of "average malpractice costs" is meaningless. Most affected are OB-GYN (not "OG-BYN", as Kerry said) and neurosurgery, and certain other high risk specialties. They are the canaries in the medical malpractice mineshaft. They are most affected not because they have the most negligent physicians - indeed, they often are the most skilled and highly trained of physicians. They are adversely affected because adverse outcomes in such specialties may have devastating long-term consequences, or perhaps more important, are most easily sold to juries as due to negligence. It is much easier to convince a jury that a bad baby is due to obstetrician error than it is to convince them that a cardiac event after coronary bypass surgery is surgeon incompetence. The average non-medical lay person expects delivery of a healthy baby to be the norm - don't women deliver at home with a midwife? - but an uneventful recovery from open heart surgery is considered to be something of a miracle. So the crisis strikes first at the high-liability-risk specialists, forcing them to curtail services, relocate to more favorable states, or leave practice altogether. This is already taking place in many areas, is well-known, and is highly detrimental to health care in such areas as critical services go lacking.

The less widely appreciated problem with malpractice costs and access affects far more physicians and patients. For many years, the federal programs of Medicare and Medicaid have contained a hidden tax: they have not paid their way, reimbursing at or below the cost of providing care. For years, health care providers - and patients - have paid this tax by offsetting these losses with reimbursements from private payers. This option is no longer viable, as rising health insurance premiums and dropping third party reimbursements eliminate this income redistribution. As a result, physician practices, with their viability as businesses threatened, are reevaluating their willingness or ability to see such patients - not out of greed, but out of necessity.

A recent WSMA physician survey showed that 57 percent of doctors polled said they were limiting their Medicare patients or no longer seeing any at all. In Bellingham WA, Family Care Network, which has 11 locations and provides about half the primary care for its area, is typical of the dilemma many practices face:

"In every case, when we got above a certain percentage (about 25 percent) of Medicare and Medicaid patients, it was impossible to operate the office in a way that it would pay for itself," said Dr. David Lynch, who directs clinic operations for the 45-doctor group. "And that's before we paid our doctors anything. We realized we would go out of business if we didn't do something." In 2000, Family Care Network lost an average of $4 every time one of its physicians saw a Medicare patient.


The overhead expenses increased by spiraling malpractice premiums make the break point at which medical practices can afford to see low-reimbursement federal health care patients lower each year. Finding a primary care or GYN physician in my area who will accept a new Medicare patient in referral is extraordinarily difficult. Of the 10 practices in my specialty in my area, only 1 will accept new Medicaid patients - and that number is capped. My former group practice, which accepted Medicaid, saw Medicaid patients who would drive 2-3 hours to see us, who could not find a specialist who would take them any closer to home. Coordinating care in such situations - scheduling x-rays or diagnostic studies, or meeting with families - was almost overwhelmingly difficult.

Our malpractice lottery is causing severe disruptions in access to care, as well as eliminating access to certain specialties altogether. This is not merely about preserving physician incomes. The solution requires a radical rethinking of the approach to adverse events in medicine - one which, unfortunately, neither presidential candidate is likely to endorse - especially those who have profited greatly from the current system.