Tort Reform Fools' Gold

"Whats in it for me?" seems the rallying cry of the stakeholders involved in the discussion over universal health care in the United States. The American Medical Association has made it clear that its price for universal health care in the United States is tort reform. And, if major health care reform should pass it is very likely that some sort of tort reform will pass. But, while this is a long sought after dream of physicians, one would be mistaken to believe that it will be a gold mine of health care spending savings.

Tort expenses represent a small percentage health care costs. Physician groups claim that the amount in claims is actually a small part of the problem. They claim that fear of litigation require them to preform unnecessary procedures and tests to reduce liability.

Physician's fear of being sued is obviously quite real. The human body is almost infinitely complex. Random things often happen. Further the health care system itself is incredibly complex and has many qualities which introduce systemic risk to the patient which are largely beyond the physicians control. Further the nature of the insurance market distributes the cost of litigation mostly on the risk associated with a procedure rather than on the quality of work by the physician. Just as you will be charged more for health insurance if, through no fault of your own you happen to be a female of child bearing age a physician is charged more if they perform procedures with a higher risk of catastrophic failure. Thus a obstetrician is charged more from her insurance company because the cost of a botched delivery can be catastrophic not because she is a bad physician. The physician therefor charges more to the insurance company for deliveries and the insurance company charges more to the lady buying health insurance on the possibility that she might get pregnant.

It is a frustrating system which provides very little incentive for good care. But remember the obstetrician pays more primarily because of the way that insurance companies and physicians decide to charge for risk throughout the health care system. Physicians could agree to share the risks equally and then vary insurance rates on the physician's performance rather than the risk inherent in their specialty.

However physicians chose to use a system which does not give strong incentives to good performance. Almost universally a bad physician in a low risk specialty pays far less than excellent Physician in a high risk specialty. By seeking to cap large awards Physicians may reduce insurance premiums for high risk specialties but may not reduce premiums at all in low risk specialties. Further, it will do nothing to place more incentives on quality care.

Thus physicians will have very little reason to change their "defensive medicine" habits -- if a large amount of health care spending is related to "defensive medicine." In fact there is very little reason to believe that expenses attributed to "defensive medicine" would disappear absent the threat of tortuous action.

Physicians may be bad patients. But they are even worse clients to their lawyers. We all have to take measures to reduce our liability at work. We may curse the frustration of it, but physicians often seem to believe that they are immune from the responsibilities associated with almost any business. They believe that it is somehow an intrusion for lawyers to intrude into their business and resent their advice. But, is a Physician's judgment actually superior to their attorney's.

The answer seems to be no. Certainly no for limiting the physician's liability. But also no for patient care. The last thing a lawyer would advise is to through every test and treatment under the sun at a problem. After all every test and treatment extends the physician's liability as well as possibly reducing it.

The uncomfortable truth about the supposed "defensive medicine" is that health care providers get paid for it. Are they doing test as a defense against being sued or are they doing tests to make more money? Unfortunately, as office staff will tell you, the greatest determiner of what tests and procedures are performed is what the insurance company will pay for.

The burden of proof is on the physicians to show that money spent on "defensive medicine" is a reasonable response to liability in the tort system. A reduction in punitive damages for example would provide no change whatsoever in the calculus of whether to perform defensive medicine in specialties in which that would provide little reduction in liability and no reduction in premiums.

Since it is far from clear that defensive medicine is the logical response to current liability, it is very difficult to see how it would be less logical after tort "reform." It is even less likely that tests and treatments will be substantially reduced.

So, see tort reform as what is, a probably necessary concession to the AMA. It is unlikely to be a source of health care savings.