Great reasoning, especially considering the state level approach. I'm a law student and was all in favor of a federal cap (my concerns about the constitutionality aside) but am now re-evaluating my position. Keep up the good work.

"Fee shifting" is one issues that could be addressed by tort reform. The normal assumption of innocent until proven guilty is turned upside down in the court system, since anyone can sue another party in the civil courts. There is no screening processes for the courts such as there are for peer-reviewed journals or major media channels. The New York Times and CBS News are examples where false charges brought dire consequences.

One approach to tort reform would be to toughen the consequences of perjury. In a notable NYS case a man spent years wrongly in jail while the witness who fabricated her testimony got away scott-free. Currently perjury indictments are rare and seem to be limited to high-profile cases.

I've talked to lawyers who are very flip about committing perjury and say it's rarely enforced because the district attornies have more important things to do. Since the discovery of truth is at foundation of the justice system, this disregard for the consequences of perjury troubles me. My stance is enforcing the laws on the books already would go a long way to reducing fabricated lawsuits.

QUOTE "The real benefit of malpractice liability is its effect if any in deterring medical negligence."

This is, perhaps, my greatest criticism of the current medical malpractice system. There are two seminal reports that I think shed light on this often contentious subject. The first was the '91 Harvard study on medical malpractice. The second was the 2000 IOM report, "To err is human."

The Harvard study demonstrated that the overwhelming majority of patients who have been injured due to malpractice (over 95%) never sue. More disturbing, those that bring suits, and are compensated, are not victims of malpractice; rather they have experienced a negative medical outcome. Recent studies by the same author, Troyen Brennan, indicate that the best predictor of a med mal payout is the severity of the injury, not the presence of malpractice.

What I found important about the IOM report was its discussion about medical errors. The report stated that roughly 100,000 hospitalized patients die each year due to medical errors. Of these, 75% are due to systemic errors, i.e., there is not a system in place to check the drug interactions of in-patients.

So here we have a case where most of the errors are systemic, yet we have a tort system that is blaming individual doctors. This system does little to encourage safer behavior. Whether accurate or not, many doctors feel that med mal suits are a crapshoot, any of their patients could sue for anything. Further, individual doctors have little ability (both finanically and administratively) to implement systemic changes that could actually go a long way to improving patient safety. Finally, when faced with a lawsuit doctors refuse to discuss the case with their patients or colleagues, thus inhibiting the ability to learn from mistakes. This does nothing to promote patient safety.

Furthermore, when the tort system only compensates ~3-5% of patients injured by malpractice, yet also compensates many undeserving patients, there needs to be serious reflection. Ultimately the medical malpractice system is flawed. It is not compensating those it was designed to, nor is it promoting safer behavior by physicians.

I should note that I think caps are a terrible idea. They have done little to prevent the increasing insurance hikes. What seems to have worked in states like California is stronger insurance regulations.

You acknowledge that an indirect effect on national health-care costs from higher malpractice premiums is the increased cost of practicing defensive medicine. What about the cost to the system of having fewer doctors, where some are driven out of practice -- and some are deterred from practicing at all -- by being unable to afford the high premiums? Or the cost to the system where doctors increasingly choose specialties instead of general family practice because they must in order to be able to pay their premiums? It sounds good to say a preferable reform would be to switch to experience-based premiums, but the reality is often that good doctors get sued (and incur significant legal costs, including possible settlements without acceptance of fault) no matter what they do. In other words, because there are few disincentives to suit for disgruntled patients (perhaps more unhappy with outcomes than knowing of any particular wrongdoing on the part of the physician) and their lawyers (who, as pointed out, get large portions of any recoveries), and there are incentives to pull in everyone even tangentially involved with a particular patients case, and sort out real fault later, you're going to have many cases where even good doctors are sued. Thus, the cost of premiums to cover the high costs of defending these myriad suits goes up -- and the likelihood of efficiently setting up experience-based premiums is lessened because of its difficulty.



I think it is plausible to posit that capping noneconomic damages in malpractice suits will bring down premium costs and thus positively benefit the health-care system because it will serve as a disincentive to some lawyers to bring more frivolous suits (or force high settlements in avoidance of trials) and allow insurance companies to more readily assess their risk and so stop raising physicians' premium costs so much.

Before we start mandating experience rated malpractice premiums, we should pause and consider why private insurers haven't adopted them on their own.

My hunch is that a doctor's past malpractice lawsuit experience is a poor predictor of future malpractice suits. After all, if it were an useful predictor, then an insurance company would gain a competitive advantage by making use of that information. If no insurance companies are using experience rating, then I would assume that there is no advantage in using them.

I would like to see some data supporting the claim that capping damages will reeduce frivolous lawsuits. I am sorry, but this is a ridiculous claim. Capping damages is not the best, or even logical, way to achieve that end, if that is indeed what it is designed to accomplish.

If we want to limit frivilous lawsuits then by all means let's do so. But this would require penalties against lawyers, or a loser pays system. As far as I can tell, most people are not discussing such measures.

Malpractice costs is one of the great myths of healthcare inflation, The medical establishment wishes to blame its economic woes on the legal community.
As you point out malpractice costs are a small fraction of the healthcare equation.

To me, the fundamental issue is a quality of care
issue. The medical community failure to police itself has led to the outbreak of all kinds litigation. The lack of accountability by the medical community whether by medical societies or state medical boards to eliminate the incompetent or dangerous practioners has created this climate. Together with a curtain of silence, a tendency to protect ones' peers rather than protect and educate the public elicits little sympathy from me.

The medical establishment's failure to establish a system of accountability in terms of economic costs and quality of care is the real issue.It is a "chuzpah" to blame lawyers,policians and the third party payors for the economic excesses of
medical costs while claiming to be an innocent victim.

In their blogs, Posner and Becker both rely on the standard economic model of the tort system. In this model, a tort has the following properties:
1. It is an accident between legal strangers, with no prior relationship before the accident.
2. The acts of one party (the injurer) impose risk on the other party (the victim).
3. The harm suffered by the victim is largely economic (medical costs, lost wages), so that monetary compensation can “make the victim whole” and such compensation is like insurance.
4. The system works without error.

They apply this model to medical malpractice, but in medical malpractice none of these assumptions is met.
1. The parties are not strangers; a doctor and his patient have a prior relationship. Therefore, the parties could agree on the terms which would govern in the event of a mishap if the courts would enforce the agreement. Moreover, since the parties are not strangers, we would expect in the general case that any compensation in the event of malpractice would be added to the fees charged by the doctor, so that the patient pays up front for any expected compensation.
2. While the acts of the doctor may impose some risk as an unwanted byproduct, overall the acts of the doctor reduce the risk of the patient, else he would not seek out medical care.
3. Much of the harm suffered by the patient (and the harm that Becker specifically deals with) is nonmonetary, in the form of “pain and suffering” or “lost pleasure of life,” measured by what Becker calls “what individuals are willing to pay to avoid death or the injuries in question.” This class of harms has many peculiar properties; one is that it does not raise the marginal utility of wealth, so that people generally do not want to insure against this form of loss. Thus, any compensation received by the patient is a form of insurance that is not worth its actuarial cost. For every dollar in the system, about $.50 is the cost of operating the system, and of the rest, about $.25 is unwanted compensation for pain and suffering. Only about $.25 is for desired compensation for harmed individuals. For nonmonetary damages, the link between prevention and desired insurance is broken.
4. The system operates with errors; in many cases, doctors will be found liable for occurrences such as unpreventable birth defects. This means that an experience rating system such as Posner advocates might harm the wrong doctors. Moreover, it would probably lead to many doctors refusing to undertake risky procedures (which is already happening).

These characteristics together mean that an important effect of the malpractice system is to increase the costs of medical care (to pay for the compensation for pain and suffering) and therefore to actually reduce the amount of medical care people receive and to increase the risk they bear. Moreover, if Becker’s proposal for increased compensation were adopted, this problem would become much worse. Since the parties are in a pre-accident relationship, the best solution would be to allow free contract over the terms that will govern in the event of a mishap. Failing this, a cap on non-pecuniary damages would probably approximate what they would agree to, and is a useful public policy.

It's unlikely to occur in the current climate, but one rarely hears mentioned the idea that physicians should be able to contract with patients to be held harmless. Some of us have had physicians whom we've trusted so implicitly that we would not be averse to that. I once read somewhere that an excellent indicator of whether a patient would sue a physician was the sort of rapport or relationship they had. Given the present insurance-driven economic model where patients don't bear the costs of their treatments, it's unlikely that contractual freedom would be on the table in dealing with malpractice issues.

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Per Kimberley's point above, I'm not sure I see how experience-based premiums work without some limitation on the risk of litigation against doctors. This could take the form of restrictions on patients ability to sue, or that of limitation on how much an individual suit could cost the doctor -- in other words, a cap on damages. The second would likely be much easier to design and live with.

I do agree that a cap by itself does not obviously accomplish anything as far as reducing malpractice insurance premiums, increasing the attractiveness to doctors of key specialties like Ob/Gyn or reducing overall health care costs. However, it is not evident that the current system has been effective in reducing the incidence of malpractice. Also, and with all respect, arguments for caution with respect to tort reform must appear somewhat dubious when accompanied by assertions that the real cost of malpractice liability consists largely of the time of the lawyers and expert witnesses who are the current system's most obvious beneficiaries.

Ah, the much-maligned class action lawsuit! it is in their opposition to these suits that conservative judges and politicians reveal their pro-corporate, status quo biases.

Class action lawsuits are brought by the People,
for REAL wrongs suffered at the hands of State
or Corporate actors. They are brought when multiple persons have been wronged in similar ways, as in Pollution cases, and when no one individual person has the resources to prove their case against the giant corporatelaw firms.

Class action lawsuits are a leveling force in American law. For that reason they have been one of the primary tools of Civil Rights lawyers. It is particularily ironic that Posner would choose to malign class action lawsuits, implying that they are without merit and could only succeed in "sympathetic" districts, on the day before we celebrate Martin Luther King Jr. and the victories of the Civil Rights movement.

The reason most class action suits are brought in state courts is that the Federal Judiciary is very often hostile to them. Judge Posner knows this, he knows of the Snyder and Zahn cases, where the Supreme Court established anti-aggregation-of-claims precedent that forced most class action claims into state courts.

Forum-shopping is no new thing, defendants will remove cases to Federal Court any time they think they can get an advantage by it. The lawyers who successfully worked to the famous Brown v. Board of Education decision practiced forum shopping, and we now applaud their ingenuity because in retrospect we know that their cause was just.

Class action claims should be protected, because they are one of the few ways by which groups of People can petition the government for redress of collective wrongs. When multiple citizens are hurt, the primary concern becomes not one of compensation but of justice. To quote Rev. King:

"Injustice anywhere is a threat to justice everywhere" -- MLK, Letter from a Birmingham Jail

I'd like to see some commentary on how the judiciary has assumed the power to levy punitive damages-- it would seem that defining punishable wrongs and establishing guidelines for punishment would fall among the duties of the legislature (with room for interpretation by the judiciary).

It's interesting that not one of the posts attempting to defend the idea of capping damages has addressed the issue of the effect of the insurance companies' investment portfolio on premium increases. It seems to be a constant in any forum where the issue is being discussed. I'd be in favor of tort reforms that really want to go after frivolous lawsuits. I just don't see that capping damages is reform, just another revenue enhancer for the insurance companies. And the doctors who support it are suckers, IMO.

I fail to see why an experience-based system for med mal insurance premiums wouldn't work. I see it as largely akin to the automobile insurance industry, where there is also no protection against frivolous suits. For instance, suppose two people were involved in a very minor fender-bender, and one decided to sue the other for so-called "soft tissue" damage. Even if the suit gets dismissed via summary judgment on the pleadings alone, the defendant's insurance company is still on the hook for the cost of hiring an attorney to draft the answer. This seems awfully similar to the situation of a doctor getting hit with a frivolous suit. If an automobile insurance company can be saddled with the cost of having an attorney answer a frivolous complaint, why should it be different for a med mal insurance company?

I think you all should be more careful with
what you call "frivolous" suits. In the vast
majority of medical malpractice cases, there
has been a very serious bad result through
no fault of the patient. It may have been caused by a known or unknown side effect, an unexpected reaction to treatment, or doctor error, but we can almost never blame the comatose or maimed person for contributing to the accident.

Imagine yourself in a similar situation, you
have gone in for a routine prescription, taken the drugs prescribed, and experienced total renal failure and must spend the rest of your shortened life on dialysis. You ask the doctor what happened, but only get a form letter from the hospital's lawyer. The drug company denies all knowledge. You are about to go bankrupt from the
unexpected medical bills.

Now in this situation, someone has to pay for the cost of the accident. Ideally, we would want the person at fault to pay, but since the Dr. and the Drug company aren't being helpful, the only way to prove who is to blame is with an expensive trial. It is not frivolous to ask for an accounting. It is not being "responsible" to accept financial ruin when the only thing you DO know is that the accident was not your fault.

This is the background and the situation in the vast majority of Tort suits.

The Federal Rules of Civil Procedure already have a mechanism for identifying and punishing frivolous claims. The defense lawyer can file a Rule 11 motion, and if the judge agrees there is no basis for the claim, the case will be dismissed and the lawyer who brought it can be sanctioned.

Congress' push for "Tort Reform" is not being undertaken solely in order to reduce "frivolous" awards, the focus on "punitive" damages betrays its actual purpose. Congress is trying to limit those specific kinds of cases which it, in its Republicanism, dislikes. Punitive damages distribute wealth down the class structure, they operate to punish Corporations when regular damages would not be sufficient to deter them from hurting people. For instance, when McDonalds decides that it is cheaper to settle some burn cases than to throw out coffee that cooled before it sold, only punitive damages will stop them.
When a hospital figures out that it is economically efficient to deny treatment to uninsured poor children and instead pay settlements to the few parents who find a lawyer, the only way to enforce our policy about access to treatment is to make denial of treatment more expensive for the hospital.

And THAT is what the neo-economicons will stop with their attack on punitive damages.

Judge Posner,

Once again, another insightful piece on tort reform. I am wondering if contract principles, rather than tort law, could solve the problem of frivilous lawsuits. Are you in favor of that? Also, in tort law, is there any practical difference between using a "strict liability" versus a "negligence" standard? Finally, in punitive damage cases, should the standard of proof be raised from preponderance of evidence to something higher? Thanks.

p.s. I think you are the best judge in the country, including the Supreme Court

I wonder about the assertion in the main post that "there is evidence that premiums are strongly influenced by the performance of the insurance companies’ investment portfolios." There is also evidence that investment performance has little, if any, effect on premiums. Some of that evidence comes from comparing the neighboring states of New Hampshire and Maine. One company, Medical Mutual of Maine, is the largest insurer in both states. It charges, on average 40% higher malpractice premiums in NH than it does in ME. The rates are higher in every specialty and the differences are smaller for some specialties and larger for others.
Investment performance cannot explain the difference. The company has has one investment pool so there is no difference in the returns on what the company gets from NH and what it gets from ME.
The most likely explanation lies in the medical injury recovery systems, because the states are very similar demographically -- NH per capita incomes are somewhat higher -- and their legal systems are also similar. NH does not allow punitive damages (I'm not sure about ME), so that can't explain the difference either.
There is really only one significant difference in the two states' recovery systems: ME has mandatory screening panels and NH does not. In ME, the three-person panel in each case evaluates whether the provider's conduct breached the standard of care and whether, if so, the conduct caused the plaintiff's injuries. The panel's findings, if unanimous, are admissible if the case goes to trial.
The insurance company's actuaries say that the frequency and severity of claims in the two states are almost the same. Severity appears to be slightly higher in NH, probably due to the state's higher per capita income. The big difference is in expenses -- what the main post above refers to as "the actual resources consumed by such liability, principally the time of lawyers and expert witnesses," to which one should probably add the insurer's administrative expenses. The difference is about $18,000, meaning that expenses are about $18,000 higher in NH per claim.
The Maine panels do not keep any plaintiff from getting his or her day in court, do not cap or limit damages, but do appear to keep costs down, which has resulted in ME's premiums being significantly lower than NH's.
Wouldn't this the kind of reform be a good thing?

It's striking that insurers don't adjust premiums based on experience. Also, doctors don't have anywhere near the robust internal grievance system lawyers do for client complaints and internally imposed discipline up to suspension/disbarment. I don't have the stats on me, but it's a very small fraction of doctors who account for a sizeable share of malpractice awards.

The "tort burden" on most doctors could be a lot lower if the medical/insurance profession did a better job of (a) suspending/disbarring bad doctors, (b) hiking the insurance premiums of the "bad" doctors -- because that would have the efficient effect if driving bad doctors out of the market (just like any business with higher costs gets driven from the market).

Form of information costs we're seeing here:

(1) Every now and then, complex information (e.g., high health care costs and its many complex causes) can be abused to support rent-seeking (e.g., liability shields for a powerful, respected profession).

(2) Cultural problems inhibiting efficient inclusion of information into prices/costs: Doctors have a bit of a culture of rejecting "questions" from anyone else -- patients, their insurance companies, judges, and lawyers. The problem is that information about who's a good or bad doctor comes largely from those external sources. Every now and then, institutions' cultures get them into trouble when they close themselves off to external scrutiny. I think that's some of what goes on here -- even when doctors receive information (e.g. repeated complaints/claims against a doctor), they reject it based on their powerful heuristic that external information is just meddling to be ignored and opposed.

Surely it is not true that "the real benefit of malpractice liability is its effect if any in deterring medical negligence." Is there not a separate benefit in an injured person receiving compensation and a wrongdoer bearing the cost of that compensation? As near as I can tell, the deterrent effect occurs without regard to who receives the damages. And yet it matters whether the damages are paid to the injured party, or paid as a form of tax, or simply incinerated. (I suppose one can argue that the only reason to pay money to the injured party is that it motivates them to initiate the lawsuit that deters malpractice, but I am unpersuaded). Stated differently, it is a good thing (a "benefit") if injured parties are made whole and bad actors made to bear the cost of doing so. I can be persuaded that the litigation furthers that end so inefficiently and inadequately that the benefit is not achievable, but that in itself is a failing of the system.

"The costs of malpractice premiums are only about 1 percent of total U.S. health-care costs. Moreover, insofar as physicians are forced to swallow the cost of the premiums rather than being able to pass them on to their patients or their patients’ insurers in the form of higher prices, the premiums do not actually increase total health-care costs. There is an indirect effect, however, insofar as malpractice liability causes doctors to practice defensive medicine."

The 1 percent number seems dubious, but since I have heard it repeated (in the presidential debate even) without challenge, I will accept it.

I do not understand why you would say doctors or HMOs "are forced to swallow the cost of the premiums rather than being able to pass them on to their patients or their patients’ insurers in the form of higher prices."

Maybe I'm missing something here, eminent judge, but I fail to see how they are "forced" to not convey a portion of those costs onto patients and insurers. Any economist knows that a portion of a tax or cost increase on the production side is passed on to the consumer. The amount the producer may project on to the consumer is dependent on elasticities of supply and demand. In this particular case of health care, we are dealing with more or less a necessity, which allows a producer to project more, not less, of their cost on to the consumer because the quantity of health care demanded is relatively insensitive to price.

I agree with Palooka that part of the cost of insurance is passed to doctors and part to patients, based on the relative price elasticities.

I also agree with Kimberly that a major hidden cost of the malpractice regime is driving doctors out of business. If the cost to society of lower supply of medical services outweighs the benefit of deterring malpractice, that is a major problem of the system.

I would like to make two points: (1) the use of the police power of the state to enact welfare-enhancing policies should always be evaluated against the potential for the harm to reputation to abate the problem-- in other words, if Doctor X gets a rep for bad doctoring, he might not be able to keep his doors open, and reputation can sometimes be a superior method of signaling to consumers than the deterrence function of tort law. In med mal, I do not think that reputation loss is a good mechanism of welfare enhancement at all, but it is an important part of the analysis. Also,

(2) I agree with A.J. that contract law is a preferable legal regime to tort law. These are contracts between doc and patient, not unconsented-to torts like a battery or even a negligent car accident. The historical reason why it fell into tort law has to do with the fiduciary nature of the relationship and the extreme informational differences between doctor and patient. In an era of managed care and very strong MCO/HMO companies, they have at least as strong a bargaining power as the local doctor's office. They can therefore bargain for the optimal level of damages in the event of an injury. Patients that want high protection will choose plans that have high damages contracts, and patients that cannot pay for it or do not want such high protections can greatly lower their bills by bargaining for lower damages. Liquidated damage clauses are common in some areas of business, and they can form a useful function here--especially for folks who cannot receive health care because they cannot afford the required high quality that tort law regulation imposes.

Law review article of mine on the economics of punitive damages in med mal: 81 N.C.L. Rev. 2371. ;)

A couple of "radical" thoughts (that should not be so "radical"):

1. As some have pointed out, if the main concern is frivolous lawsuits, one would think that the focus of any reform effort should be on those frivolous suits. Of course, the McDonald's coffee suit (the oft-cited example) was not deemed by that particular court to be "frivolous," because the judge let the theory of liability go to the jury. Most of us think that hot coffee shouldn't be an $8 million suit. But why exactly? Do we disagree that there is a duty to keep coffee at a reasonable temperature? Or do we disagree that someone could suffer $8 million of damages from a burn? Do we maybe disagree with punitive damanges as a concept, or perhaps with punitive damages for the particular wrong of unreasonably hot coffee? Or does the whole thing just sound like a joke because every one of us spills coffee on ourselves now and then? Let's figure out exactly what we think is wrong with the $8 million coffee suit, and then let's tailor a remedy to the particular problem, instead of changing the whole common law jury system over a cup of coffee.

2. Arguably, med mal suits are important because there is no other effective means of "quality control" in the delivery of medical services. Perhaps we should think critically about alternative quality control means as a possible replacement for lawsuits, or at least for punitive damages. I'll leave it up to the policy makers to propose more specific ideas.

p.s. At least at first glance, I think that contract law is a poor analogy for at least some (if not many) doctor-patient relationships. For example, Patient A is injured in a car accident. The ambulance takes him to the nearest hospital, Hospital B, where Doctor C treats him. Patient A has no relationship to Hospital B or Doctor C; he has merely been taken to the nearest provider. Especially in the case of acute care, there is no opportunity to investigate potential doctors, discuss terms, or negotiate a liquidated damages clause (that one gets a big "come on" from me - how many lay people can effectively negotiate such a clause or understand it, even in completely good health?). Basically, unless you travel with a team of doctors (or ride on Air Force One), every person is at the mercy of the medical profession as a whole, which is an argument for standards that ensure a high quality of care across the board. Not to mention that it's quite arguably unconscionable to allow anyone to negotiate for substandard care (not that conscience matters here).

to answer palooka's earlier question about passing on increased malpractice insurance costs to patients. doctors are eating more of these costs and are unable to pass them on to patients as has been done in the past.

several factors are responsible including the incredible power that hmo's and other health insurance companies wield over physicians, and physicians inability to collectively bargain. hmo's set the price structure and pay the md's - end of story. the hmo's, in most cases, are not increasing their payments to reflect physician's increased costs due to malpractice insurance.

Japhy,

My knowledge of the medical services is relatively poor, and I thank you for that insight.

I would certainly never quibble with the mild assertion that doctors, now more than ever, are having to pay a large share of malpractice costs in addition to the medical consumer.

It is quite another thing, I think, to suggest that malpractice premiums are entirely (or almost entirely) taken out of physician's compensation. And if so, that isn't exactly something to celebrate (as Posner has done in his essay). If physicians' compensation is pinched. If the desirability of that profession suffers from reduced compensation and greater professional risk (of being sued or driven out of medicine), then fewer talented individuals will enter it and many more will leave it prematurely. The quality, and perhaps the quantity, of physicians' would direclty suffer from Posner's supposedly "costless" transfer of wealth from doctors to patients.

The marked decrease in the supply of doctors in the OB/GYN field is notable because of that field's susceptibility to medical malpractice. If Posner's hands off approach prevails, I suspect we'll see a steady decline in the medical profession as a whole.

In response to David's concern about contract law in this area, I think a good solution would be to change the current "professional standard of care" set by statute to a default rule, as well as the law of remedies. Unless parties state otherwise, the current liability regime governs the service. However, if parties consent otherwise, then they may modify the rule to get closer to an optimal result.

I do not think that such a contract would be unconscionable, as long as it is procedurally kosher–such as requiring the patient to sign right before entering the operating room, which would certainly fail such a test and which would probably not be done, anyway, given the potential for the hospital to get a nasty reputation. Patients have HMOs to bargain for them. The alternative for many people today is simply not to have health care. Many people do not, because the price is too high and because supply is too limited. Palooka’s point about declining supply in OB/GYN is real. I was recently talking to an ob doc who stated that only about 25% of the ob residencies in the state are being taken up by students from AMA-accredited schools, a total reversal from 20 years ago, when they were very competitive residencies. That shows med students don’t want to do it. In rural areas, there are often no obstetricians, so children are born without that protection.

The point that insurance is not based on a doctor's experience is made by several people. This stands out as a gross inefficiency and fixing it would go a long way to solving the problems. An even greater inefficiency in my mind is that whether an OB delivers 1 baby in a year or 10,000 the insurance premium is the same. Clearly the number of patients served is the single biggest driver of future malpractice liability yet for some reason insurance companies do not consider it in their pricing. There seems to be something very wrong with the insurance market and that makes me think that insurance companies have more to do with the problem than lawsuits.

I have to disagree with the premise argued Mr. Posner's post above that medical malpractice carriers do not adjust rates according to an insured's claim history. This is simply untrue, as this is actually a regular part of doing business in the medical malpractice insurance business.

I have actually worked for a large mutual medical malpractice carrier, and the rates of each and every policy written by my former employer was adjusted upwards according to that physician's past claim history. While the formula was complicated, it factored in the total number of claims (regardless of whether it was a pre-litigation matter or lawsuit) in the insured's file as well as cost of any settlements or judgments paid out on behalf of that insured. In addition, physicians who fell into the category of repeat offenders often saw their policies cancelled when the volume of their case history and pay-outs made on their behalf became too high. While I left that position six months ago, I have no reason to believe that the policy at this company has changed in that short time period.

While I have a great deal of respect for the impressive body of work Mr. Posner has produced over the years, I have to ask how he came to the conclusion regarding this issue. I find it very difficult to believe that he does not have a fact checking system in place, but I am left with no other conclusion to explain such a drastic oversight on his part.

With regard to the side discussion on allowing waivers as a way to reduce the malpractice burden. It does seem like a radical idea, and for more than the reason that it just upsets the status quo.

Power. Physicians enjoy a unique profession which gives them considerable power and respect. So not only are we dealing with just an asymetry of information which could be resolved by consumer eduction, but we are dealing with a considerable pyschological impact of the status of the physician. Even if a patient has considerable knowledge to make an informed decision (a level of which few are willing and able to achieve), they still may be influenced the the physician's status.

Moreover, I think many of the commenters advocating this scheme overestimate the percent of the population actually capable of rendering sound medical conclusions. I'd be the first to advocate patients take a more active role in their treatment, but I suspect that a significant percent of the population lacks the requisite knowledge, literacy, time, and motivation to come to a reasonable conclusion about state of their medical care.

"My hunch is that a doctor's past malpractice lawsuit experience is a poor predictor of future malpractice suits."

This is a very good argument, and it is well supported by the observation that no insurance companies have adopted the practice of using a doctor's history to determine insurance rates. I would take this one step further and point out that since only 5% of malpractice examples are litigated, whether a mistake results in a lawsuit has little to do with the egregiousness of the doctor's mistake. Insurance companies have learned that any doctor can be sued, regardless of how careful he is.

This is also a good argument against punitive damages for doctors. We're not talking about reckless or intentional malpractice here. If the insurance companies, who make their profits by accurately determining the risk of a lawsuit, think that any doctor can be sued regardless of his history, then punitive damages will not "deter" doctors from acting negligently. There are too many factors beyond their control.

Daniel,

Please see my previous response posted above. Your premise is faulty because medical liability insurance carriers DO take a physician's claims history in account when determining the rate s/he will be charged. The author has not provided any support for his position to the contrary. Unfortunately I suspect he has failed to do so because an inquiry directed to the medical liability carriers in question would have quickly cleared up this misconception.

In August, 2004 the Washington Post printed an article on Medical Malpractice. In this article, they printed a chart showing median jury awards in the three DC Metro Jurisdiction (DC, MD, VA). Surprisingly there was an inverse correlation between the existence and stringency of a cap and the median jury award. In other words the jurisdiction with the lowest cap had the highest median award. Obviously three jurisdiction does not make a robust sample, but if such results were to hold more broadly, they might suggest that caps are exactly the wrong way to correct any med-mal problems. It also raises an itneresting question as to why the median awartd might be higher in states with lower caps.
Two possibilites come to mind,a lthough there are probably more. First the cap may have a psychological impact on the jury. In other words, with the existence of caps juries tend to award this amount to all patients. If the disperiosn of awards were clustered around the median, this might support this hypothesis.
Another even more insidious hypothesis is that trial lawyers are in fact profit maximizers. This assumption would certainly be consistent with standard theory. One could imagine that a trial lawyer faces two states of the world "no-cap-world" and "cap-world." In no-cap-world she would take a few cases with a high potential payout, but a low probability of success. Obviously, she would only win a few cases but when she did she'd make lots of money. In cap-world taking a few cases would not payoff because the payout is capped. In this case, she will cahnge her production function to take a large number of cases with a high probability of payout. Obviously for this scenario to work the probabilities and payouts have to be right. However, if the distribution of awards in jurisdictions without caps tended to have fatter right tails, then awards in jurisdictions with caps, that might lend credence to this hypothesis. A particularly insidious aspect of this hypothesis is that administrative costs could actually go up in cap-world because the number of lawsuits would go up.
As Judge Posner and Professor Becker both point out, caps could ahve a number of unintended consequences, and certainly are not a panacea as is suggested in some quarters.

" In other words the jurisdiction with the lowest cap had the highest median award."

Sorry to burst your bubble, but this paradox is easily resolved. The question, Mr. Webb, is which caused which? Did high median awards cause the legislature to adopt malpractice caps, or did malpractice caps cause median awards to go up? Admittedly either is a possibility. To even begin to unravel that question you have to have more data than you speak of.

It's also interesting that the Post chose median rather than a true average as a measure of central tendency. This is a particularly questionable choice because the aim of tort reform is to limit the excessive awards (cases which which effect the average, but not the median).

I would agree that the causation could run both ways. Jurisdictions with high awards might be likely to impose caps. However, you would presume that over time the caps would have an impact and therefore the median would come down. In the DC-MD-VA The caps had been in place for at least some period of time. If the legislature had impsed the caps because of high awards the awards would ahve either come down or the caps were ineffective. That said it might be interesting to look at the data in time series to see how the median varied before and after the caps.

With regard to median versus arithmetic mean (which is what I presume you mean by average) I think you are missing a deeper point on tort reform. The purpose of tort reform should be to increase economic efficiency. Excessive awards may be one form of economic inefficiency. On the other hand a large number of smaller lawsuits could be even more inefficient. This is why both measures of central tendency are valuable. The median MAY imply a larger number of smallish awards (think normal distribution sqeezed right and left)

As I ntoed at the beginning of my initial post this is not a robust smaple set (or an exhausitve look at the data). It would be itneresting to dig deeper into the data to see if this was jsut a DC-MD-VA anamoly or if there is something deeper. If there were it might generate an interesting journal article.

All of the liability cap schemes I've looked at set the same limit for a stubbed toe that they impose for near-total dismemberment, and for any injury between the extremes. Until I see a cap system proposal that actually takes account of such factors, my mind is closed on the subject. With liability caps, we are seeing a political attack on the economic viability of the plaintiffs' bar, not a considered tort reform measure.

Furthermore, the rhetoric that blames "frivolous" lawsuits as the cause of huge expense can only be used by those who are either dishonest or ill-informed. Any practicing lawyer or judge knows that "frivolous" lawsuits do not result in damage awards. The only expense involved in frivolous lawsuits worth discussion is the cost of defense, and the existing rules on fee-shifting and lawyer discipline are more than sufficient to deal with that problem.

"However, you would presume that over time the caps would have an impact and therefore the median would come down."

If caps are aimed at the most excessive of awards, then I wouldn't expect much of a change in the median, though I would expect a change in the mean, ceteris paribus.

It's also difficult to compare awards state by state without adjustment. Economic damages by state, of course, will vary with economic conditions in each state. I'd expect the average award to be quite different in NY than in MO, for example.

"With liability caps, we are seeing a political attack on the economic viability of the plaintiffs' bar, not a considered tort reform measure."

Thank you, for a while I thought I was the
only one.

I hope there is still a plaintiffs' bar left by
the time I finish this whole law school thing.
With all this rollback, I get the feeling I should be reading more history.

The goal of Tort reform should be to promote individual justice. Remember what happened last
time the western world became obsessed with making the trains run on time? A lot of very evil
things appear economically efficient ex ante.

Why aren't malpractice premiums experience-rated? Are there legal impediments to this? Are we supposed to believe that insurance companies are leaving that proverbial hundred dollar bill on the sidewalk, by not experience rating? Or, perhaps there are simply no observable characteristics upon which to experience-rate risk for malpractice.

Experience-rating or in some way differentiating between doctors based on risk is a very interesting question. Or more accurately, it is very surprising that insurance companies do not do more of it. It seems to fly in the face of conventional economic theory regarding insurance. Indeed in recent years a fair amount of ground-breaking work has been done on the idea that insurance companies may have MORE information about your risk than you yourself have. (See e.g. Cowley and Phillipson's 1999 Paper). This overturns the conventional belief that adverse selection would cause high risk individuals to drive out low risk individuals. I will admit that med-mal is not my area of expertise, so it may be that insurance companies do differentiate more than is apparent from a laymens perspective. Anyone with more expertise have any thoughts on this. Do insurance companies have effective ways to distinguish high risk doctors from low risk doctors? If not, any thoughts on why not? This would be a particularly interesting example of "market-failure." If it is an example of market failure that circles back to the basic question in Judge Posner's essay, "Are caps the approrpiate or the most effective remedy."

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