A fair and balanced judicial process which treats all parties equitably is a prerequisite for a stable and prosperous society. That basic premise has guided a notable chunk of my career for the past 20 years, as I have worked on efforts to reform and improve the functioning of our tort system both nationally and in every state that would have me. Just in the last year, I have had the privilege of being a part of successful initiatives in five states.
This quest began for me in Texas and has resurfaced on several occasions, including now. The legislature recently passed a significant tort reform measure which, once fully implemented, will transform Texas from a state with one of the nation’s worst reputations as a “litigation lottery” to one with a model mechanism for the proper adjudication of legitimate disputes. An analysis by my firm indicates that this measure would (conservatively) add $36.1 billion per year to the Texas economy and create over 240,000 permanent jobs.
One significant element of the new system is a cap on the level of non-economic damages in medical malpractice cases. To ensure that this provision meets constitutional muster, it is included on the ballot as Proposition 12 in the upcoming September election. Because a lot of folks make a lot of money by gaming the current system, this item is generating a heated public relations campaign. I would like to strip away the emotional appeals from both sides and provide a few important and prudent facts.
First, there is a widely propagated myth that this measure prevents patients with legitimate injuries from being fully compensated. That assertion is just plain wrong. Nothing has changed in the ability to achieve full compensation for medical expenses, lost wages, ongoing care, and even interest. If the costs persist for decades and run into the millions of dollars, so be it. That is exactly as it should be. Proposition 12 deals with a different issue: the amount that can be added on top of that to “punish” a healthcare provider. It gives rational structure to the heart-wrenching task of reimbursing people for intangible (and inherently unmeasurable) suffering. This is the part where you might hear in a courtroom that “No amount of money can compensate for this loss, but a few million dollars (of which the attorney gets 30-40%) wouldn’t hurt!” Such non-economic damage awards have quadrupled in the past decade. A few years ago, only one-third of all damage awards were non-economic in nature. Today, the fraction is two-thirds.
Second, let’s peel the onion back a few layers and see what really happens. Because of the prospect of outlandish jury awards, an excessive number of frivolous lawsuits are filed as attorneys and plaintiffs find it worth their time to take a chance on a big judgment. I have seen advertisements, for example, encouraging you to call and potentially receive money if you have had a certain procedure done, irrespective of whether you were cared for properly. About 85% of all cases are unsuccessful (no harm is found), yet each one costs tens of thousands of dollars, (at a minimum) to defend. The result is that the risk of practicing medicine is dramatically increased. Because society as a whole pays for the few random “winners” in this lottery, malpractice insurance rates have skyrocketed, rising by more than 500% over the past 25 years, and 20-25% last year alone. Moreover, the number of medical liability insurance carriers currently in the Texas market has fallen from 17 to 4 in just three years.
As this process unfolds, doctors and hospitals no longer offer risky (but important) services. Patients don’t get treatment, nursing homes go without liability coverage, and practitioners leave the profession (or at least the state). The Texas Board of Insurance indicates that significant reductions in malpractice rates will occur with these caps, and a recent federal study indicates that, after adjusting for other factors, states with limits on non-economic damages have 12% more physicians per capita than those without such protection.
When all is said and done, we all pay more and get less in the way of healthcare because of the current situation. About half of all states now have limits, and those proposed in Texas are fair and the result of outstanding legislative work involving extensive input from all points of view and widespread, bipartisan support. As the other states with significant problems reform their approaches (and many of them have in the last year), it accelerates the volume of suits filed in more lucrative venues such as Texas, putting further pressure on our courtrooms, doctors, and insurance providers (the number of filings has doubled in the past decade). However, it’s the people of Texas who really suffer as treatment availability is compromised and cost is increased. The critical change outlined in Proposition 12 is a matter of basic economics and basic finance; voting for it is basic common sense. We can ill afford to do otherwise.