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RX: RADICAL LAWYERECTOMY

Forbes, January 27, 1997, at Pg. 112

Copyright 1997 by Peter Huber. Electronic copies of this document may be distributed freely, provided that this notice accompanies all copies.

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HOW DO YOU TRIM $ 20 billion a year from Medicare? That's about what it will take to stave off bankruptcy. The easiest way: amputate lawyers.

It can be done. In 1995 Congress immunized community health care centers from malpractice suits. The federal government now covers the claims incurred by these federally subsidized clinics -- claims are heard by a judge, not a jury, and there are no punitive awards. The clinics save an estimated $ 40 million in malpractice insurance. That funds treatment for an additional half-million indigent patients.

Why stop there? The country spends about $ 8 billion a year treating elderly heart-disease patients. Cap awards, abolish punitive damages, implement a few other direct, financial limits on medical malpractice suits, and you reduce hospital expenditures on cardiac patients by 5% to 9%.

If limits like these had been written into federal law, nationwide spending on cardiac disease in the late 1980s would have been $ 600 million a year lower. Extrapolate these results to medical spending generally -- a debatable but reasonable enough basis for estimation -- and you find that tort reform would save the country as a whole well over $ 50 billion a year.

But how much more negligent medicine would that encourage? How many more cardiac patients would die? How many more would get inferior treatment and suffer a second heart attack as a result? The best estimate: None at all. Nor would any true victims of negligence go uncompensated. The reforms we're talking about here don't eliminate liability, they just place sensible limits on windfalls and double-dipping. They are in fact already part of the law in many states.

The numbers I cite come from a very important paper, "Do Doctors Practice Defensive Medicine?" written by Daniel Kessler and Mark McClellan, both of Stanford University. The paper appeared in the May 1996 Quarterly Journal of Economics.

The authors analyze data on all elderly Medicare beneficiaries hospitalized for serious heart disease in 1984, 1987 and 1990. The study correlates spending for medical care with state tort laws. About three patients in five were treated in states that placed no direct limits on rights to sue. But two in five were hospitalized in states that did. Direct liability limits have clear, strong effects on medical spending, the study concludes.

But that's just the first half of the story. Previous studies -- most notably one conducted by Harvard Medical School in 1990 -- asked panels of doctors to review patient files and attach subjective judgments about adverse outcomes and deficient treatment. Much of the "negligence" identified in this way had no significant impact on the ostensible victim. Studies like this didn't reveal much about the consequences of malpractice litigation because they didn't pin down the consequences of malpractice itself.

With elderly cardiac patients there are objective standards for assessing ineffective care: Patients die, or they end up back in a cardiac ward not long after discharge. Analyzing the record on these solid criteria, Kessler and McClellan reach a second, clear conclusion: None of the liability reforms studied "led to any consequential differences in mortality or the occurrence of serious complications."

If liability doesn't force doctors to provide better treatment, why does it boost the cost of medicine so sharply? Unlimited liability gets you more medicine, not better. Lawyer-shy doctors administer tests willy-nilly, and hand off patients to specialists with great alacrity. They know that the surest way to avoid liability is to dispatch your problem patient to someone else -- a lab technician or another doctor. This can go on indefinitely. It's very expensive. And medically useless.

Congress has generally left medical malpractice reform to the states. But when Medicare and Medicaid patients sneeze, it's the federal Treasury that catches cold. No principle of federalism requires federal taxpayers in Montana to pay for Mississippi medicine ordered up by the lawyers there, not the doctors or patients.

The best place for Congress to balance the Medicare budget is on the backs of trial lawyers. These lawyers are not old, not poor and not needed.


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