Time to Replace the Medical Liability Tort System

By Richard L. Jackson

Have you ever been to the doctor and suspected him of ordering a test just to cover his bases, not because you actually needed it? Anyone who has worked with doctors, nurses and hospitals over the years knows it happens and understands that this practice of “defensive medicine” is a major cost driver.

Defensive medicine – doctors ordering unnecessary and typically expensive tests, treatments and procedures to avoid malpractice suits and litigation – is a major contributor to still-skyrocketing health care costs. These tests, of questionable clinical value, add up to as much as $650 billion each year, according to a poll of physicians. In Georgia alone, the amount is an estimated $13.25 billion. That’s money that could be better spent ensuring better access to quality care for patients.

The current medical liability tort system is exceptionally expensive, complicated and results in awards in just 20 percent of all legitimate malpractice claims. That leaves many patients without the compensation they may desperately need and deserve – in particular, the poor, minorities and women. Today’s system is adversarial, expensive, inefficient, drives a wedge between patients and physicians and forces the practice of defensive medicine. It limits fairness to injured parties because lawyers can only financially justify the largest cases.

Traditional public policy proposals have focused on capping the amount of damages recovered by an injured party. These policies primarily address costs of malpractice but do nothing to reform the underlying causes of defensive medicine that impact the patient and, eventually, the taxpayer footing the bill for almost half of U.S. health expenditures.

What is needed to protect patients is a system that eliminates the incentive for physicians to practice defensive medicine. One solution is a Patients’ Compensation System. Drawing from today’s workers’ compensation system, successful international examples and other innovative reform ideas, this state-driven approach establishes an alternative to traditional litigation, and is designed to lower costs, improve quality and better serve patients.

At its core the Patients’ Compensation System would move most medical malpractice claims from the courtroom to an administrative process, realigning the interests of patients, doctors and taxpayers. This system would provide real access and real justice for all patients. It would be funded through the same insurance purchases that providers make today, with no cost to Georgia taxpayers.

Patients would be entitled to a hearing in front of the Patients’ Compensation Board, a politically independent, quasi-governmental body, comprising professionals from the legal, medical, patient and business communities. The Board would oversee a Medical Review Council of medical experts, which would examine patient claims on their merits and make recommendations to the board on whether a claim should be compensated.

If a claim is determined eligible for compensation, members of a Compensation Council would recommend economic and non-economic damages to the Board based on historical awards under the current system. The amount would generally be based on earnings, expected follow-on medical and rehabilitation costs, as well as reasonable support needs.

This process ensures all patient complaints are heard through an easily navigable administrative system that yields compensation quicker and more often than today’s litigation-based system. The Patients’ Compensation System could address approximately three times as many claims as the current system without raising malpractice rates because today less than 30 percent of malpractice premiums actually go to patients.

This approach would improve quality and increase patient safety by tracking data on all claims in a blind database that protects the privacy of provider and patient. The data would be used to inform best practices and shared with providers to enhance quality and patient safety. Additionally, by reducing defensive medicine, it reduces the corresponding dangers that arise from unnecessary tests and procedures.

The Patients’ Compensation System tackles the underlying, systemic causes of defensive medicine in a way that realigns incentives toward patient safety and reduces medical errors, while assuring all patient complaints are heard, quickly resolved and fairly compensated. As Georgia looks to improve its health care system and address the rising costs that are hurting taxpayers, consumers and businesses, a Patients’ Compensation System is one solution for real reform.

This commentary was written for the Georgia Public Policy Foundation by Richard L. Jackson, Chairman of Patients for Fair Compensation, an advocacy group dedicated to educating and proposing policy solutions that eliminate the unnecessary costs of defensive medicine. Mr. Jackson also serves as Chairman and CEO of Alpharetta-based Jackson Healthcare, whichprovides hospitals with physicians, nurses and allied health professionals to ensure the delivery of timely, high quality patient care. The Foundation is an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

 © Georgia Public Policy Foundation (October 14, 2011). Permission to reprint in whole or in part is hereby granted, provided the authors and their affiliations are cited.