It's fiscally irresponsible not to address liability reform

A message to all physicians from AMA President Peter W. Carmel, MD.

By — Posted Feb. 6, 2012.

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The economics are irrefutable, and the human evidence is sobering. The present medical liability situation in this country is adding to the already high cost of American medical care, driving physicians away from certain geographies and practice specialties -- and shortchanging patients in the process.

We all pay the price for our broken medical liability system and the direct effect it has on the cost of medical care.

Study after study has shown that today's medical liability system contributes to high health care costs because it forces physicians to practice defensive medicine. This shows up in unnecessary tests ordered and procedures performed, and it also shows up when physicians do not provide certain care to avoid litigation risks. In 2003, the Dept. of Health and Human Services estimated the cost of defensive medicine to be between $70 billion and $126 billion per year.

Many also believe the system actually hinders safety improvements, because our highly litigious environment discourages physicians from the open collaboration necessary to understand the cause of medical errors.

The present situation also hurts patients: In areas with high insurance premiums and significant litigation, there has been a decline in the number of physicians willing to practice in high-cost specialties such as obstetrics, emergency medicine and surgery.

As an example, according to a 2009 survey from the American Congress of Obstetricians and Gynecologists, more than 63% of obstetricians-gynecologists have altered their practice due to the risk of liability claims and litigation. Sixty percent reported changing their practice, such as limiting their number of high-risk patients, due to insurance affordability or availability issues.

In certain areas of New York, gynecologists and obstetricians have seen premiums increase 41% since 2004 -- up to $206,913 in 2011. General surgeons in those same areas have seen a 64% increase over the same period. Other states have seen similarly large increases.

And there is no arguing with the inefficiency and administrative burden that results from litigation, without any real benefit. A recent review of closed claims showed that in terms of compensation for medical errors, the outcomes are inaccurate about equally on both sides: Twenty-seven percent of claims involving errors were uncompensated, yet 27% of compensated claims did not involve an error.

It is well established that most liability claims against physicians are dropped, withdrawn or dismissed. Yet even those claims can run up an average defense cost of $26,851. Overall, it costs $47,158, on average, to defend a physician against a liability claim. That 2010 figure represents a nearly 63 percent increase from 2001.

According to data from the National Assn. of Insurance Commissioners, total incurred indemnity losses in 2010 were $3.4 billion, and defense costs were an additional $2.4 billion -- all of which had a direct effect on the cost of medical care.

Our system is obviously and destructively broken. And while 35 states have passed some sort of medical liability reform that puts some sort of cap on damages, it will take federal legislation to put us back on track.

So why hasn't Washington acted? Certainly the example of state reform is a good one:

California and Texas have both seen more stability in their medical communities since they passed reform legislation that also continues to serve the needs of patients.

In California, which passed a Medical Injury Compensation Reform Act in 1975, medical liability premiums have increased at only a third of the national rate. The California law set a $250,000 cap on noneconomic damages. It also set a limit on attorney contingency fees and established a statute of limitations on those who wish to sue.

The nonpartisan Congressional Budget Office has estimated that national tort reform similar to what exists in California would lower the federal deficit by $62.4 billion between now and 2021.

In Texas, medical liability reform legislation, which also included a $250,000 stacked cap on noneconomic damages, has helped stem the tide of physician flight and, in fact, has encouraged newly minted doctors to stay or move to the state. Overall, Texas has enjoyed a 61% greater growth rate in newly licensed physicians in the past four years than in the four years preceding reforms.

In addition, the ranks of high-risk specialists in Texas have increased more than twice as fast as the state's population.

Across the nation, there is growing agreement that the system is out of control. The U.S. Chamber of Commerce, which represents American businesses, and a host of other organizations outside the medical community, also are calling for national reform.

This year, Congress has an opportunity to enact meaningful medical liability reform legislation to repair the current litigious climate that continues to increase health care costs and compromise patients' access to care.

The U.S. House of Representatives' bill HR 5 and its Senate companion bill, S 1099, the Help Efficient, Accessible, Low-cost, Timely Healthcare Act of 2011, includes reforms similar to those that have proven to be effective in California for more than 35 years.

The HEALTH Act provides the right balance of reforms by promoting speedier resolutions to disputes, maintaining access to courts and maximizing patient recovery of damage awards with unlimited compensation for economic damages while limiting noneconomic damages to a quarter-million dollars. In addition, the HEALTH Act protects medical liability reforms at the state level.

So today we face a conundrum. The public is adamant that the federal government reduce costs, especially in our health system. Evidence shows that reforming the medical liability system will reduce those costs significantly while still protecting patients. And in a world facing a growing shortage of physicians, the present liability situation is only making that problem worse. Even though organizations like the AMA are supporting investigation of innovative liability reforms such as health courts, early disclosure models and evidence-based medicine protections, comprehensive legislative reform at the federal level is still needed.

If you have not yet done so, I encourage you to contact your elected representative in Washington and urge that Congress address liability reform sooner rather than later. Resources and more information are available from the AMA online (link).

We can only hope that in our tense economic environment, the message of liability reform is beginning to resonate through the halls of Congress.

If our elected representatives are really paying attention, they understand that doing nothing to fix the broken medical liability system is a fiscally irresponsible action that adds unnecessary costs to our health system and adversely affects our physicians and patients.

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