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Introduction to State Health Policy: A Seminar for New State Legislators
Slide Presentation by Randall R. Bovbjerg, J.D.
On April 3, 2005, Randall R. Bovbjerg, J.D., made a presentation in a seminar entitled Introduction to State Health Policy.
This is the text version of Mr. Bovbjerg's slide presentation. Select to access the PowerPoint® Slides (1.1 MB).
Reforming Medical Liability: Conventional Approaches and Beyond
Randall R. Bovbjerg, J.D.
The Urban Institute
Standard disclaimer applies. The title slide has a picture of the speaker.
Official Sympathy Survey
A cartoon signed by Wasserman for the Boston Globe, an LA Times syndicate, shows three sinister-looking professionals. The caption asks: In the continuing battle over medical practice costs, whom do you feel sorry for? A, the poor, downtrodden doctors; B, the lowly, underpaid lawyers; C, the small, struggling insurance company. Note: You can only vote for one.
The top icons for this and most following slides are a balancing scale and a caduceus.
Road Map of Talk
- A bit of history.
- Problems today:
- Insurance "crisis."
- Causes and implications.
- Conventional solutions, mainly tort reform.
- More fundamental changes to improve compensation and safety.
A Bit of History
- Series of crises have changed industry
- Two lesser-known crises in 50s and 60s: rising claims, then better rating, medical society plans.
- First national crisis in mid 70s: higher claims, availability problems, mutuals enter, tort reform.
- Second national crisis in mid 80s: higher claims, affordability, other lines too, shift to claims-made, tort reform.
- Third national crisis from Y2K: described below.
- Regulation by States—solvency and rates
- Exception: Federal Risk Retention Act 1981, 1986.
Latest Insurance Crisis
- Insurer withdrawal, retrenchment.
- Price increases and selective underwriting; varies by State.
- Big for some MD's, can't pass through.
- Limited access problems: high-risk providers in high-risk regions, perhaps long-term shifts.
Trends in Physician Premiums
On a line graph, the x-axis represents years from 1993 to 2002 and the y-axis shows numbers from 90 to 150. All lines start at 100.
- The Internists line sinks to about 98 in 1994, rises to about 118 in 1996, sinks to about 104 in 1998, and rises to about 149 in 2002.
- The All Physicians line rises to about 102 in 1994, sinks to about 94 in 1996, and rises to about 123 in 2002.
- The Obstetricians slash Gynecologists line sinks to about 96 in 1994, is quite steady into 1995, rises to about 99 in 1996, sinks to about 93 in 1999, and rises to about 127 in 2002.
- The General line sinks to about 91 in 1995, rises to about 99 in 1996, sinks to about 92 in 1999, and rises to about 130 in 2002.
Source: CBO analysis of Med Liabil Mon surveys
Factors Underlying Rise
- Lawyers say it's all insurance cycle, interest rates and insurer misbehavior.
- Doctors and insurers agree there's cycle, but:
- Trend in claims payouts went up in mid 90s.
- In some States, claims up.
- Reinsurance up.
- Both partly right, doctors slash insurers more.
Crises: Cycles and Costs
A line graph has an x-axis marked Time and a y-axis marked with increasing numbers of dollar signs. A dotted straight line on the graph, marked Underlying Trend in "True" Claims and Other Costs, rises slowly. Crossing the line at regular intervals is a sine wave marked Superimposed Price Fluctuation from Competitive Cycle.
Problems and Implications
- Main cost of malpractice insurance is malpractice claims; duh.
- Interest earnings have effect because they're a negative cost but don't drive cycle.
- Crisis seems to be abating, not "normalcy."
- Big differences across States, even within State.
National Malpractice Costs
On a line graph, the x-axis represents years from 1975 to 2003 and the y-axis represents billions of dollars. There are two lines, both consistently rising except for a rather steady period between 1984 and 1996.
- The Physicians line starts around 1 billion dollars and reaches about 16 billion.
- The Total line, which is always higher than the Physicians line, starts around 1.5 billion dollars and reaches about 27 billion.
- Beneath the graph is a table indicating CPI-adjusted costs of 1.16 billion dollars in 1975 and 7.76 billion in 2003, for a ratio of 6.70.
- The percent health expenditure was 0.89 in 1975 and 1.59 in 2003, for a ratio of 1.78.
Source: Tillinghast 2004
- Today's top three: tort reform, tort reform, and tort reform.
- Insurance market interventions, other near-term reforms.
- Broader reforms: replace part or all of current liability system.
Conventional "Tort Reforms"
- Goals: insurance availability, affordability.
- Legal cutbacks
- Caps on awards, shorter times to sue, no double recovery, cut attorney fees, et cetera.
- Work to cut claims costs, also premiums; calms insurance markets, somewhat.
- As "takeaways", face challenges in court.
- Improve insurance performance.
- Sometimes add quality or safety regulation.
Caps Are Centerpiece
- Design: total award, only "pain and suffering."
- Doctors: only caps are more than "band-aids."
- Lawyers: unconstitutional, the worst hurt are hurt worst.
- Insurers: like caps, trade premium volume for claims predictability.
- Scorecard: in about half of States, push for national.
California MICRA and Federal Bills
- Big Three
- 250,000 dollar cap on pain and suffering.
- Collateral source offset.
- Shorter time to sue.
- Other provisions
- Periodic payments.
- Sliding scale for attorney fees.
- Multiple defendants pay by percentage of responsibility.
- 90-day notice of claim.
- Physician discipline
- Punitive damage limits.
- Drug slash device provisions.
- Asbestos reforms.
- Class action reform.
MICRA is the Medical Injury Compensation Reform Act of 1975
Federal, HR 4600 and successors, administration proposals
Note: Federal bill would alter traditional Federal slash State roles in this field
Insurance Changes: Public
- Regulation slash antitrust, lawyers' preferences.
- State provision of insurance
- Insurer of last resort: Joint Underwriting Association.
- High-end risk: Patient Compensation Fund or reinsurance.
- Some subsidies of physician premiums
- Old New York requirement that hospitals provide top layer.
- Pennsylvania: for catastrophic coverage.
- Maryland subsidy: ended HMOs exemption from premium tax.
Insurance Changes: Private
- Alternative Risk Mechanisms; ARMs
- Mainly hospitals, seem more common this crisis.
- Hospital-physician collaboration
- May subsidize rates: stark issues.
- "Channeling" programs at academic medical centers.
- Broader hospital-physician collaboration could:
- Create new risk pool, with positive attributes.
- Save on investigation, defense.
- Prompt new mode of cooperation on safety.
- Multistate arrangements?
- More even-handedness, not just takeaways.
- Major underperformance of law's three key goals:
- These are persistent problems, not crises.
- Hereafter, possible alternatives to California's MICRA and proposed national mega-MICRA.
Key Goal 1: Fairer Compensation
A cartoon shows a seafaring pirate captain looking over a brochure marked: Been Injured? You May Be Entitled to Compensation. The pirate grinningly tells a frowning crewmember: It's a treasure map.
Key Goal 2: Better "Signals" Slash Safety
A cartoon shows two prototypical American Indians standing near a fire and observing smoke signals from a distant fire. One says: It's from my attorney.
The cartoon is signed by Shanahan.
- Akin to conventional reform
- More even-handed liability reforms.
- Broader reforms, aim at all medical injuries
- Radical disclosure, full "transparency."
- Reward, only, disclosure with tort reform.
- Trial run for administrative compensation system.
- Create advance lists of "avoidable classes of events."
1. More Even-Handedness
- Within current system.
- Improve liability process, not just prospects for one party or other.
- Address specific problems
- Unpredictable or inaccurate liability determinations.
- Unpredictable payouts, not just intangibles but also future "economic" losses, discount rates.
Elements of Improvement
- Expert witnesses
- Not just "tighter" qualifications, for example, less than 20 percent of income, but also availability, objectivity.
- Evidence-based medicine?
- Caps other than flat, one-size-fits-all
- "Stacked" caps, sliding scales, or ranges.
- Routinize elements of future loss determinations.
- Improve legal performance
- More active judicial management.
- Tracking of data: timeliness, costs, awards, lawyers' performance.
Why Do More Than This?
- Tap into new capabilities in "patient safety"
- Fix the problem, not the blame.
- Regulation, punishment can help, but fall short.
- "Surface" problems, analyze, change processes, monitor, repeat.
- Early successes in medicine.
- But fear of blame and liability keeps problems hidden, and claims, too.
2. Greater Transparency
- More "transparent" disclosure to patients
- Risks before the fact, unanticipated outcomes after.
- Remediation, settlement offer.
- Treat patients ethically.
- Improve trust, cut litigiousness.
- Ease providers' malpractice fears.
- Facilitate systemic improvements.
Greater Transparency, continued
- Many saying this should happen, including AMA, Joint Commission on Accreditation of Healthcare Organization.
- Actual practice less clear, many say they do.
- May be good business slash liability strategy
- Some indication from Virginia that it's fiscally feasible.
- Increasingly becoming conventional wisdom.
- May help safety analysis, too.
- Fears may linger.
3. Early-Offer Reform
- Defendants promptly offering to pay future out-of-pocket losses cannot be sued for pain and suffering.
- Rewards fast disclosure, potentially increases numbers.
- Much faster and lower overhead.
- Assures funds for future needs.
- No complex changes to law or liability insurance.
- May be "gamed": only offer for big cases.
- Lawyers hate, insurers uneasy about ongoing risk.
A cartoon shows a lawyer and his defendant approaching the judge's box. The lawyer says: We would like to request a change in venue to an entirely different legal system.
The cartoon is signed by P.C. Vey
4. Administrative Compensation
- Cover preventable injuries, not full "no fault", control payouts.
- Similar to Workers Compensation, other nations.
- Fiscal incentives for safety practices, data.
- High speed, low overhead, more consistency.
- Hard to legislate as good package: compare to no-fault auto.
- Still dependent on claims brought by patients.
- Not well-grounded in operations of medical entities.
Admin Comp, continued
- Evidence from Virginia and Florida birth-related neurological injury compensation.
- Feasible to run program with one listed event.
- Maintained access to obstetrician liability insurance.
- Cut OBs' premiums 2.5 times below trend.
- Settles in one-third the time, one-fifth the administrative costs.
- Comparable compensation, satisfaction.
- Too small, some variability in application.
- Political and legal attacks.
5. ACEs and Provider Groups
- List preventable injuries in advance as ACEs, avoidable classes of events.
- Pay structured damages automatically, like disability insurance, without liability process.
- Resolve disputes, other cases through nonjudicial process.
- Implement through private contract
- Provider-patient contracts.
- Employer slash health plan-enrollee contract, akin to Kaiser mandated arbitration but with new rules.
- Potential for choice at time of service, PPO 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.
- Evidence from research
- Listings are feasible.
- Would cover a lot of current system (half hospital OB cases but three-fourths of cost).
- Potential is great but unproven; need demonstration in willing locale.
Need State Experimentation
- Proposed November 2002 in IOM report to DHHS.
- Nonjudicial, patient-centered, safety-friendly new injury resolution system.
- Federal liability reinsurance to encourage State action; cover very high level of losses.
- State legislation to try one of two approaches, akin to 4 and 5 above.
- In short term, be more even handed.
- In medium and long run, try more promising approaches, support demos.
- Key standards throughout
- Fairer compensation.
- Better safety.
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.
Sliding Scale in Lieu of Cap: "Pain and Suffering Reform Unquote
On two bar graphs, the x-axis represents levels of injury on a scale of 1, Minor, to 6, Severe, and the y-axis shows increasing numbers of dollar signs. The left graph, titled "Traditional" Flat Cap, has a dotted line across the middle. The bars in descending order of height are 4, 2, 6, 3, 1, and 5. Bars 4, 2, are well above and 6 is slightly above the threshold. Bars 3, 1 and 5 are below the threshold. The other graph, titled Sliding Scale, shows bars of equal length at different heights from the x-axis. These heights rise consistently with injury level.
Source: Author's schematic
Current as of October 2005
Reforming Medical Liability: Conventional Approaches and Beyond. Text version of a slide presentation at Introduction to State Health Policy: A Seminar for New State Legislators. Agency for Healthcare Research and Quality, Rockville, MD. http://www.ahrq.gov/news/ulp/statepolicy/bovbjergtxt.htm
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