Why tort reform is a frivolous diversion

Every circus needs a sideshow, which must be why every time the issue of rising medical costs gets debated, politicians start clamoring for “tort reform.”

You know the argument: Disgruntled patients, goaded on by unscrupulous lawyers, file frivolous malpractice lawsuits and walk off with millions of dollars in undeserved awards granted by teary-eyed jurors. Doctors respond by practicing “defensive medicine,” ordering lots of unnecessary tests to cover their behinds. Bingo! Medical costs hit the stratosphere.

Sen. Johnny Isakson (R-Ga.) boiled this view down to its essentials in a recent Republican weekly radio address, calling for the elimination of “frivolous lawsuits against doctors and hospitals.”

Tort reform has lots of fans. The public’s on board because it’s easy to hate lawyers. Doctors and hospitals love it because they hate to get sued. Insurance companies love it because the less money they pay out to plaintiffs, the more they get to keep. Republicans love it because trial lawyers give three-quarters of their political donations to Democrats. And Democrats pay it lip service because they’re afraid to look like lawyer lovers.

Any issue featuring so many interest groups cantering about on hobbyhorses is an issue where the truth goes to die. So let’s try to resuscitate the patient with a shot of reality.

First: “Frivolous” litigation. Lawyers define frivolous lawsuits as those that, from first to last, don’t have a leg to stand on. Just because a lawsuit ends up a loser doesn’t mean it’s frivolous.

That’s especially true of malpractice cases, which can bristle with complexity. Often the only way to know if an injury resulted from professional error is to use a lawsuit to pry loose the facts.

“It can be hard to tell until late in the litigation if there’s really no claim,” Michelle Mello, an expert on malpractice at Harvard’s School of Public Health, told me. An extensive study she helped conduct of malpractice case files showed that frivolous cases, as usually defined, are rare -- and those that do get brought usually don’t yield a payment to the plaintiff.

The obverse is a bigger problem -- injury cases where the victim doesn’t get a dime. These often involve lower-income or unemployed patients, says David M. Studdert, Mello’s research partner, now at the University of Melbourne, Australia.

The truth is that medical liability isn’t a big driver of health costs overall. Studdert estimates the cost of malpractice litigation, in court and through defensive medicine, at roughly 2% to 3% of all U.S. healthcare spending -- in other words, no more than $50 billion out of a total annual bill of $1.7 trillion. (You’ll hear estimates as high as $200 billion from outfits like the American Medical Assn., which is the antithesis of an objective source.)

It’s fair to say that some reform is needed in our tort system. The trick is to make sure that the benefits of any changes go to the right people -- the patients. That hasn’t been the result of the preferred remedy for malpractice lawsuits, which is to hit trial lawyers in the pocketbook. Cap their fees or jury awards (of which they customarily take a percentage), the theory goes, and they’ll knock off the ambulance-chasing.

This model of tort reform comes, alas, from California. In 1975, a sharp run-up in doctors’ premiums stampeded the Legislature into enacting draconian limits on malpractice cases. Under the Medical Injury Compensation Reform Act, or MICRA, noneconomic damages -- that’s “pain and suffering” -- were capped at $250,000. Lawyers’ fees were also limited. Many other states followed with similar laws.

Who got helped by MICRA? Not consumers. California’s healthcare costs aren’t measurably lower than other states’. In fact, they’re measurably higher.

Not the victims of medical error, at least not fairly: A Rand Corp. study in 2004 found that the cap fell disproportionately on “those with small economic losses but great damage to the plaintiff’s quality of life.”

Women were big losers, possibly because their claims often result from obstetrics and gynecology procedures that affect fertility or sexual lifestyle, conditions which aren’t amenable to economic analysis. Such patients find it hard to even bring cases, for lawyers know the long odds of winning a judgment big enough to cover costs.

Doctors and hospitals? Premiums in California continued to rise sharply for 10 years after MICRA. Rates finally plateaued in the late ‘80s, but the reason may have been 1988’s Proposition 103, which rolled back casualty insurance rates.

By the way, the MICRA cap isn’t indexed to inflation. So even if $250,000 was the right limit in 1975, it’s the equivalent of only about $62,000 now.

MICRA’s big winners are insurers. The average loss ratio for California malpractice carriers last year -- the portion of their premiums they paid out or reserved for claims -- was 16.43%, according to the state Department of Insurance. In other words, they paid out less than 17 cents of every dollar they took in.

How great a business is malpractice insurance nationwide? At American Physicians Capital (an insurer active in the Midwest), claims were falling so fast in 2007 that its chief executive publicly compared his underemployed claims managers to “the Maytag repairman.” The next time you find yourself nodding in assent while some politician carries on about tort reform, remember that its benefits will go to characters like this.

That doesn’t mean that no changes are needed, only that there are many ways to counter defensive medicine and the costs and inequities of the U.S. litigation system without shutting the courtroom door to malpractice cases.

Clearer professional guidelines for diagnostic imaging would give doctors legal cover for skipping an MRI or CAT scan that isn’t clinically indicated. Creating special courts or appointing judges to specialize in malpractice cases would help deserving victims get compensated without the grotesque overhead of full-scale trials. So would a “no-fault” system to compensate those with medical injuries regardless of their source, paired with an objective process for disciplining error-prone doctors or hospitals.

Some of these options are being tried around the country, and are promising. But none of them has the pizazz of railing about lawyers and “frivolous” lawsuits.

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Michael Hiltzik’s column appears Mondays and Thursdays.

Reach him at [email protected], read him at www.latimes.com/hiltzik, and follow @latimeshiltzik on Twitter.