Tort Reform--Posner's Reply to Comments

As usual, there were many excellent comments. Let me respond to some: Several comments point out correctly that the determination of medical malpractice (that is, medical negligence) by the courts is very often inaccurate; there are many false positives and false negatives. To that problem, capping damages judgments is no solution. An attractive solution is testimony by a neutral expert witness. The fact that judges may have difficulty determining who is neutral is no objection; the judge can ask the parties' medical experts to jointly nominate a third; he would be the neutral and the judge and jury would appropriately rely heavily on his testimony. The procedure I am suggesting is similar to a widely used procedure for picking a neutral arbitrator: each party designates one arbitrator, the two arbitrators choose the third, who is neutral, and he then provides the deciding vote. An alternative, mentioned in one comment and already in force in a number of states, is to require the malpractice plaintiff before suing to submit his claim to a panel of physicians, whose findings, if unanimous, are admissible in court should the claim result in a lawsuit. One comment pointed out that medical errors are often systemic, i.e., they result from erroneous procedures or practices by hospitals, drug companies, and other institutions rather than from mistakes by individual physicians. However, those entities are suable. It was also noted that heavy insurance premiums might drive some physicians from practice and deter some people from becoming physicians in the first place. That is true, but if the result is less medical negligence, the benefits might exceed the costs. In addition, the overall effect on medical expenses is likely to be slight, because physicians' fees are only a moderate component of overall medical expenses. Furthermore, if physicians are driven out by high premiums, the resulting reduction in the supply of physicians should enable those who remain to raise their fees. A slightly esoteric point: one comment suggested that pain and suffering, disfigurement, and other nonpecuniary losses imposed by medical errors are not real costs because people rarely try to buy insurance against such losses. However, the reason they do not buy insurance is not that the losses aren't real, but that insurance is designed primarily for replacing income or defraying an expense. I also disagree that negotiation of the level of medical care should be left to physician and patient, because they have a preexisting contractual relationship. The principle is fine (though it would require a chance in existing law), but the transaction costs would be prohibitive because of the patient's ignorance of particular procedures, risks, and so forth. In addition, a physician who told his patient that he would operate on him only if he waived his right to sue for medical malpractice would be signaling the likelihood of an unfavorable outcome. Hence physicians would be reluctant to suggest such waivers. I was pleased to learn from two of the comments that some insurance conmpanies do experience-rate medical malpractice insurance. Why others do not is a mystery, but it occurs to me that one possibility is that the inaccuracy of judicial determinations of malpractice is so great that being sued and losing a malpractice case does not provide useful information about the likelihood of being sued in the future. On this view, malpractice liability is random. One hopes not; but if so, reforms, such as those suggested above, aimed at increasing the accuracy of malpractice determinations are urgently needed.

Comments

[RWS]

Getting replies from distinguished scholars and judges on comments is a real treasure, and I thank Becker and Posner for their efforts, as I'm sure most who read this blog do. One wonders whether they sleep with the amount of work that they seem to put out.

Just because this issue is a favorite of mine, I want to clarify what I think is a preferable contractual approach to the issue, instead of tort theory. Allowing ex ante contracts to specify liability constraints is substantially more feasible in an era of managed care, where HMOs contract with physician networks on at least an equal bargaining position. HMOs are generally much more economically powerful than physician practices in setting price for any given individual contract. So, an HMO limiting liability would probably not be anything like an adhesion contract situation of a doctor requiring a signature releasing liability at the door of the operating room.

Letting the market set the optimal level of damages liability and/or level of care has substantial value-adding potential. One of the chief value-adding possibilities is lowering the impact of malpractice regulation, which increases the supply of doctors in squeezed practice areas and benefits those less well off who right now do not see a doctor because of the prohibitive expense of doing so.

I think that changing tort law rules into contractual default rules would go a long way toward protecting the patient who pays out of pocket and has little ability to bargain with full information while allowing HMOs to create less regulated and less costly medical service opportunities through contract. I would write a law review article on this if I would clear my weekend schedules a little more, heh heh.

[Zathras]

Judge Posner's comments on the consequences of rising malpractice premiums, and the assumptions behind them, bear closer examination.

Higher malpractice insurance premiums driving physicians from practice and deterring some people from becoming physicians (or deterring some prospective physicians from entering certain specialties) could reduce the incidence of malpractice if the physicians and prospective physicians deterred from practice by higher premiums were those most likely to be responsible for malpractice. What evidence is there that this is the case? Is it right to discount the possibility that physicians less likely to be responsible for malpractice, and with a choice of specialties, would tend to avoid those with higher malpractice premiums, other things being equal? To the extent that malpractice results from physicians having to handle too many patients, is discouraging physicians to enter certain specialties really the best way to reduce malpractice?

Physicians' fees are overall a "moderate component" of medical costs, but is it wise to apply this generalization to physicians in every specialty? Physicians in some specialties (e.g. Ob-Gyn) account for a higher percentage of overall costs than physicians in other specialties (e.g. neurology). In addition, the patients of physicians in different specialties may not all have the same economic profile -- once again, Ob-/Gyns will tend to serve more younger, hence lower-income patients than will, say, oncologists.

Finally, the observation that the fewer doctors remaining after high malpractice premiums have prompted some doctors to stop practicing can raise their fees is set against the assertion just above it, that the overall impact on medical expenses of doctors leaving practice is likely to be slight. This may or may not be true with respect to the cost of, say, Medicare to the federal government; it appears much less likely to be true for individual patients requiring specific kinds of services. We ought at least to consider that rising physicians' fees might be a problem for them even if they do not loom large in the accounting of all health care costs.

[Jack Martin]

It would appear to me that your comments contain some logical errors:

1. "It was also noted that heavy insurance premiums might drive some physicians from practice .. That is true, but if the result is less medical negligence, the benefits might exceed the costs".

Firstly there is no empirical evidence, to my knowledge, that negigence awards have the slightest effect on a reduction in either negligence or in class actions by lawyers.

Secondly, the logical extension of your reasoning would be to prohibit the practice of medicene ... thereby eliminating all medical negligence.

2. "In addition, the overall effect on medical expenses is likely to be slight, because physicians' fees are only a moderate component of overall medical expenses."

You avoid here the crux of the problem, which is not the effect on "overall medical expenses", but rather the cost to individual physicians of malpractice insureane ... which is indeed a considerable component of their expenses.

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