MOsanthrope

Posted by Chris on March 9, 2006 at 8:07 pm.

While over reading MyDD this evening, I stumbled upon an interesting quote by Harvard Medical School surgeon, Dr. Atul Gawande:

Less than one percent of the people who are actually hurt by medical care get help through the medical malpractice system, in part because they have a hard time finding anyone to take their cases, and then the cases take five to seven years, and then a lot of them lose.

Forgive me for a moment as I allow my currently underutilized plaintiffs’ attorney stripes to show, but this sort of thing really hacks me off.

I appreciate the good doctor’s candor, but that’s not exactly the story we heard from the medical community two years ago, before my state and many others buckled to insurance industry pressure and enacted various draconian restrictions on the ability of individuals to seek redress for injuries caused by the negligence of doctors, careless motorists, manufacturers of defective products and others.

The idea that multi-billion dollar insurance companies, armed with staff counsel and legions of defense attorneys hailing from the largest and most prominent law firms in the country, required legislative protection from plaintiffs’ attorneys and their clients was absurd from day one; but one can scarcely resist marveling at the GOP’s flair for dressing up plainly anti-consumer and anti-middle class policies in poorly-stitched Uncle Sam costumes which nevertheless enthrall middle America with their apple pie goodness. The “tort reform” crusade was a prime example.

As Bob Herbert wrote for the New York Times in 2004,

[t]he power brokers obsessed with tort reform really have the jargon down. They travel the country with overheated stories about runaway juries and jackpot justice. The way they tell it, sinister lawyers and opportunistic plaintiffs are on the hunt, preying on virtuous corporations, hospitals and doctors in search of that big payout from the lawsuit lottery.

President Bush has been complaining about “junk and frivolous” lawsuits for years. So it’s interesting to hear the following from the Center for Justice and Democracy, a consumer advocacy group:

“It may be hard to understand why ‘tort reform’ is even on the national agenda at a time when insurance industry profits are booming, tort filings are declining, only 2 percent of injured people sue for compensation, punitive damages are rarely awarded, liability insurance costs for businesses are minuscule, medical malpractice insurance and claims are both less than 1 percent of all health care costs in America, and premium-gouging underwriting practices of the insurance industry have been widely exposed.”

In looking at medical malpractice cases, I’ve been amazed by the cold-blooded attitude so many people have taken toward patients who have been seriously, and sometimes grotesquely, harmed. Referring to a Wisconsin woman who had both of her breasts removed after a laboratory mix-up mistakenly indicated she had cancer, a doctor from South Carolina told a Congressional subcommittee:

“She did not lose her life, and with the plastic surgery she’ll have breast reconstruction better than she had before.”

* * *

What is needed is a nationwide crackdown on malpractice, not a campaign to roll back the rights of patients who are injured. This is another utterly typical example of the Bush administration going to bat for those who are economically and politically powerful against those who are economically and politically weak.

Despite claims by the insurance industry, there is no evidence that soaring malpractice premiums are the result of sharp increases in the amounts of money paid out for malpractice claims. And, tellingly, industry executives are generally careful not to say that the tort reforms sought by the Bush administration will result in premium reductions.

He’s right on all counts. While tort reform legislation was pending before Missouri’s Republican-controlled legislature, a study commissioned by a former Missouri Insurance Commissioner analyzed the relationship between insurance premiums and claims. The insurance industry did not like the results:

For example, a 2005 report authored by former Missouri Insurance Commissioner Jay Angoff and commissioned by the New York-based Center for Justice & Democracy noted that malpractice insurers as a group raised their net premiums between 2000 and 2004 by 120.2 percent even though payouts rose by only 5.7 percent.

Insurers criticized the report for comparing premiums and claims from the same calendar year because malpractice claims are paid years after premiums are collected. They also said the report didn’t account for money paid out for legal expenses. Yet another report this one by the Missouri Hospital Association in late 2002 concluded that the number and cost of claims had not contributed in a significant way to the sudden increase in medical professional liability coverage. Instead, the report said, premium increases had been driven by insurers declining bond portfolio income.

In fact, when pressed to explain why their customers’ premiums do not decline following enactment of tort reform legislation, insurers inevitably admit as much:

“Insurers never promised that tort reform would achieve specific savings.” American Insurance Association

“We wouldn’t tell you or anyone that the reason to pass tort reform would be to reduce insurance rates.” Sherman Joyce, president of the American Tort Reform Association

“Many tort reform advocates do not contend that restricting litigation will lower insurance rates, and I’ve never said that in 30 years.” Victor Schwartz, general counsel to the American Tort Reform Association

A study by the Center for Justice and Democracy found that “laws that restrict injured consumer’s rights to go to court — ‘tort reform’ — have failed to cut insurance costs or rates around the country.” One study co-author described the tort reform campaign as an insidious public relations scam that has had terrible consequences for many innocent people, while doing nothing to improve the affordability or availability of liability insurance for businesses or professions.

All credible evidence suggests that tort reform legislation fails to reduce doctors’ insurance premiums. Premiums are affected by many factors, including stock market fluctuations; but the idea that the culprit was a deluge of huge judgments awarded in “frivolous lawsuits” was patently false.

Between 1993 and 2002, the number of tort filings nationwide decreased by five percent. During the same period, contract filings (often filed by businesses against other businesses or individual debtors) increased by 21 percent. Tort case filings peaked around 1990 and have generally declined since.

Moreover, a report released in 2000 by the U.S. Department of Justice’s Bureau of Justice Statistics determined that plaintiffs prevailed in less than 50% of civil cases; amounts awarded to prevailing plaintiffs were decreasing dramatically; punitive damages were rarely awarded; and when punitive damages were awarded, they were awarded in relatively small amounts.

Tort reform was a scam perpetrated by one of the wealthiest and most politically-connected industries in the country against both physicians and their patients. They pulled it off with an impressive public relations campaign which resonated with Americans generally ignorant of the legal system and easily agitated by slick anti-lawyer advertising. One after another, spots produced by innocuously-named organizations boomed from KMOX radio, comparing predatory personal injury lawyers to sharks circling their physician prey. Television’s talking heads decried the national crisis of endless astronomical judgments, awarded by runaway juries to jackpot-seeking old ladies incapable of properly securing their coffee cups. The egregious facts which had compelled the ordinary citizens serving as jurors to render these verdicts were never mentioned:

Stella Liebeck, 79 years old, was sitting in the passenger seat of her grandson’s car having purchased a cup of McDonald’s coffee. After the car stopped, she tried to hold the cup securely between her knees while removing the lid. However, the cup tipped over, pouring scalding hot coffee onto her. She received third-degree burns over 16 percent of her body, necessitating hospitalization for eight days, whirlpool treatment for debridement of her wounds, skin grafting, scarring, and disability for more than two years…. Despite these extensive injuries, she offered to settle with McDonald’s for $20,000. However, McDonald’s refused to settle. The jury awarded Liebeck $200,000 in compensatory damages — reduced to $160,000 because the jury found her 20 percent at fault — and $2.7 million in punitive damages for McDonald’s callous conduct. (To put this in perspective, McDonald’s revenue from coffee sales alone is in excess of $1.3 million a day.) The trial judge reduced the punitive damages to $480,000. Subsequently, the parties entered a post-verdict settlement. According to Stella Liebeck’s attorney, S. Reed Morgan, the jury heard the following evidence in the case:
1. By corporate specifications, McDonald’s sells its coffee at 180 to 190 degrees Fahrenheit;
2. Coffee at that temperature, if spilled, causes third-degree burns (the skin is burned away down to the muscle/fatty-tissue layer) in two to seven seconds;
3. Third-degree burns do not heal without skin grafting, debridement and whirlpool treatments that cost tens of thousands of dollars and result in permanent disfigurement, extreme pain and disability of the victim for many months, and in some cases, years;
4. The chairman of the department of mechanical engineering and bio-mechanical engineering at the University of Texas testified that this risk of harm is unacceptable, as did a widely recognized expert on burns, the editor in chief of the leading scholarly publication in the specialty, the Journal of Burn Care and Rehabilitation;
5. McDonald’s admitted that it has known about the risk of serious burns from its scalding hot coffee for more than 10 years — the risk was brought to its attention through numerous other claims and suits, to no avail;
6. From 1982 to 1992, McDonald’s coffee burned more than 700 people, many receiving severe burns to the genital area, perineum, inner thighs, and buttocks;
7. Not only men and women, but also children and infants, have been burned by McDonald’s scalding hot coffee, in some instances due to inadvertent spillage by McDonald’s employees;
8. At least one woman had coffee dropped in her lap through the service window, causing third-degree burns to her inner thighs and other sensitive areas, which resulted in disability for years;
9. Witnesses for McDonald’s admitted in court that consumers are unaware of the extent of the risk of serious burns from spilled coffee served at McDonald’s required temperature;
10. McDonald’s admitted that it did not warn customers of the nature and extent of this risk and could offer no explanation as to why it did not;
11. McDonald’s witnesses testified that it did not intend to turn down the heat — As one witness put it: “No, there is no current plan to change the procedure that we’re using in that regard right now;”
12. McDonald’s admitted that its coffee is “not fit for consumption” when sold because it causes severe scalds if spilled or drunk;
13. Liebeck’s treating physician testified that her injury was one of the worst scald burns he had ever seen.

The “jackpot justice” spin worked brilliantly. Doctors bought it and rallied around the cause. They wrote their patients about the abuses wrought by greedy attorneys and displayed placards in their offices which politely suggested that trial lawyers seek medical treatment elsewhere. (I particularly enjoyed seeing those when I appeared for a deposition bearing a check for a surgeon’s customary $1200 deposition fee). The public also bought it. Even if the industry failed to secure favorable legislation, it had firmly planted the greedy trial lawyers and their jackpot justice clients seed in our collective consciousness. By the end of the tort reform offensive in Missouri, prospective jurors’ hostility toward my clients was palpable long before the voir dire examinations.

I don’t mean to suggest that our tort system was ever free from abuse; however, the same may be rightly said of any profession. I’ve not yet heard any radio spots condemning greedy or incompetent plumbers, accountants or carpenters; but that might change the day the insurance industry figures out a way to amass greater profits by smearing those vocations. Having been forced once in my legal career to defend a baseless bar complaint, I can assure you that the legal profession does a far better job of policing its members than most.

The end result of the tort reform hullabaloo was a legal system skewed dramatically toward the interests of powerful corporations and against those of average citizens:

Just five months after its enactment, Missouri’s sweeping tort reform legislation already is having an impact on the kinds of cases plaintiffs’ lawyers are willing — and unwilling — to pursue.

With its cap on noneconomic damages in medical malpractice cases, the legislation has discouraged pursuit of otherwise worthy cases, particularly on behalf of the very young and the very old, plaintiffs’ lawyers say.

Because they’re not wage earners and typically haven’t lost income as a result of an accident, often the sole compensation of the very old and the very young when they’re injured is noneconomic damages — or damages for pain and suffering.

Now that Missouri limits those damages to $350,000 per case — regardless of the number of defendants — many of those cases are no longer economically viable to pursue, according to plaintiffs’ lawyers.

It has made it more difficult to help victims of medical mistakes, said plaintiffs’ lawyer Michael Ketchmark of Davis Ketchmark & McCreight. In a given week we’ll look at a handful of potential cases and we’re not able to take them because of the enormous costs of preparing them.”

You’ve been duped again, folks. How much longer will you play the fool?

I’m reminded of an observation made by our President in 2002:

“There’s an old…saying in Tennessee…I know it’s in Texas, probably in Tennessee that says fool me once… Shame on… Shame on you… Fool me… Can’t get fooled again.”

Never mind. I’m sorry that I asked.

---

UPDATE: Over at MyDD, the discussion has become somewhat heated. Another commentator asked why, if the insurance industry is so profitable, several insurers have become insolvent or stopped writing medical malpractice coverage. That’s a fair question. My response:
 

Many oil exploration companies file for bankruptcy protection. Is the petroleum industry unprofitable or might there be another explanation?

Insurers suffered significant losses when their bond holdings tanked in the months following 9/11, but that does not mean that these companies engage in an unprofitable business. Insurance companies raise rates when investment income is low and lower rates as the market improves (so that they may attract more policyholders and thereby increase the amount of premium dollars available for investment).

In addition, companies such as St. Paul played fast and loose with their books in the last decade in order to appear more profitable. That practice ultimately led to their demise:

The Chairman of American International Group (AIG), one of the largest insurance companies in the world and a major medical malpractice insurer, has reportedly been forced to resign as the company’s chief executive after New York Attorney General Eliot Spitzer sought to depose Greenberg in its investigation of company practices.

* * *

Manipulation of reserves set aside to pay claims has been considered a major factor precipitating the medical malpractice insurance crisis for doctors in recent years. In hard markets (i.e. dropping investment income, rising insurance premiums), as we have recently experienced, insurers increase reserves as a way to justify premium increases. In fact, the recent insurance crisis rests significantly on a jump in reserves in 2001.

In June 2002, a front page Wall Street Journal article exposed the widely used insurance accounting practice of manipulating reserves in the early 1990s, which made the medical malpractice insurance business appear far more profitable than it really was - precisely the allegation now being made against AIG.

Specifically, during the 1980s, one of the country’s largest medical malpractice insurers, St. Paul, set aside too much money in reserves. Then, in the 1990s, the company released $1.1 billion in reserves, which flowed through St. Paul’s income statements. According to the Journal, this accounting practice made St. Paul appear to be a model for big, quick profits causing many new companies to enter the medical malpractice insurance market. Competition led to severe price cuts during this period, which were inadequate to cover claims. Then, when investment income declined, rates shot up. Many companies, including St. Paul, left the med mal insurance market altogether, creating a huge supply and demand problem for doctors in a number of states, like Nevada. In other words, manipulation of reserves precipitated todays medical malpractice insurance crisis.

My point was that no credible evidence points to a relationship between tort reform legislation and lower professional liability insurance premiums; however, the insurance industry led doctors and the public to believe otherwise every 15 minutes via KMOX radio in the months leading up to Missouri’s enactment of sweeping tort reform legislation. Many physicians still hold that view, despite insurance industry admissions and overwhelming evidence to the contrary.

Tort reform harms average citizens and does nothing for doctors’ insurance rates; but it certainly helps insurers’ bottom lines.

---

Filed under: Politics, U.S., Law, Health