Medical Liability – Prospect for Federal Reform

By The New England Journal of Medicine National, News Source

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  • April 28, 2017

Medical malpractice reform appears to be back on the federal policy agenda. The appointment of Tom Price, a long-time proponent of tort reform, as secretary of health and human services, in conjunction with Republican control of both houses of Congress, has created fertile conditions for several Republican proposals that have languished for years without the requisite support. Although it has been debated many times, a major federal foray into medical liability, a state-based area of law, would be unprecedented. The prospect raises several questions: Which reforms are on the table? Would they be effective? And is the time right?

Although Price has not announced any specific proposals since his nomination, “lawsuit abuse” has long been an important issue to him. During his confirmation hearings, he described medical liability as “a really difficult challenge” and noted that there were “some exciting opportunities out there.” While serving in the House of Representatives, Price (R-GA) sponsored several bills aimed at limiting health care providers’ liability, most recently H.R. 2300 in 2015. Key elements of these bills are represented in H.R. 277, introduced by other House Republicans on January 4, 2017; H.R. 1215, introduced on February 24, 2017, by Representative Steve King (R-IA); and the Republican health care proposal released by Speaker Paul Ryan (R-WI) in June 2016.

H.R. 2300 and H.R. 277 propose “safe harbors” from liability for providers who adhere to clinical practice guidelines (CPGs). Malpractice claims would be decided by an ad hoc panel of medical experts whenever a defendant asserted that the disputed care comported with an established guideline.

Price’s bill added “administrative health care tribunals” to hear appeals of the panel’s decision. Presided over by “special judges with health care expertise,” these tribunals would issue binding rulings aided by testimony from independent experts. They would apply a gross-negligence standard, requiring patients to show that the physician’s behavior was a reckless or wanton departure from acceptable care. Either party could appeal to state court, but patients could win appeals only by producing “clear and convincing evidence” that the tribunal had erred.

Price’s legislation and H.R. 1215 would also federalize several tort reforms already widely adopted by states, including periodic payment of damages, jointand-several liability reform, shortened statutes of limitation, and attorney-fee limits. Price’s bill would also protect apologies from use in malpractice litigation, and King’s bill would allow defendants to introduce evidence that plaintiffs’ injury-related expenses were covered by “collateral sources” such as health insurance.

The most contentious reform of recent decades, a federal cap on noneconomic damages, was not in Price’s most recent proposal, probably because it’s a known deal breaker for Democrats. However, it appeared in his earlier bills and features prominently in other Republican proposals. H.R. 1215 would impose a federal noneconomic-damages cap of $250,000, except in states that already have a different damages cap.

How promising are these reform ideas? Safe harbors for physicians who adhere to evidence-based practice is an idea that dates back to the 1980s. It has attracted interest from health care provider groups, health insurers, and health policy experts. Theoretically, it could reduce the practice of defensive medicine while encouraging wider adherence to guidelines — responses that harmonize with improving the quality of care.

However, the limited evidence base does not suggest that guideline-based safe harbors are effective in reducing liability claims or costs (see table). In states that have tried them, they do not appear to have had an impact, and the programs have withered. One key reason is the surprisingly small overlap between aspects of care disputed in malpractice litigation and aspects addressed by CPGs. One recent simulation study showed that safe harbors would have eliminated defendants’ malpractice payments in less than 1% of claims; in 85% of cases no guideline applied, and when one did, physicians generally prevailed regardless. A surge in availability and use of CPGs could enlarge the overlap, but the effects of safe harbors on liability costs would probably be modest at best. Nevertheless, safe harbors are appealing for other reasons: they promote quality of care and safety by providing incentives for practicing evidence-based medicine, and they may accelerate claim resolution.

The proposed panel and tribunal structures are versions of an administrative approach to adjudicating medical injury claims that has been debated for 40 years. This “health courts” model involves replacing regular judges and juries with specialized judges who make binding determinations drawing on advice from neutral experts. We have studied administrative compensation models in depth and have advocated for them. Although there is no direct evidence that this approach would work in the United States, evidence from other countries has been positive enough to inspire serious interest among U.S. policymakers. Administrative compensation systems in Scandinavia and New Zealand have led to lower costs and faster resolution of claims, and they have high levels of physician and public support.

The administrative compensation model proposed in the Republican bills, however, deviates in several radical ways from conventional proposals. The panels described in the bills would be empowered to render decisions before the usual legal process of information exchange (“discovery”) had occurred — timing that substantially limits patients’ ability to learn what happened and build their case. The adoption of gross-negligence and clear-andconvincing evidence standards is a breathtaking departure from the norm. It stacks the deck heavily against patients and makes panel determinations virtually unchallengeable. Such features gut the promise of administrative schemes — improved access to compensation and incentives for safety improvement in exchange for more predictable damages awards, faster adjudication, and a nonstigmatizing, nonadversarial process.

Considerable evidence is available about the other proposed reforms (see table). About half the states have adopted caps on noneconomic damages, and the evidence suggests that they reduce compensation payments, some defensive practices, liability insurance premiums, and the number of claims filed. However, caps have not been shown to improve the quality of care, a key goal of the tort system.

Periodic payment, which allows payment of malpractice awards over time, can help smooth spikes in insurers’ liability, but evaluations consistently show that it doesn’t affect liability costs or quality of care. Joint-and-several liability reform, which limits each defendant’s financial responsibility to the percentage of fault the jury or judge assigns to each, is already in place in 40 states and has not demonstrably affected liability costs or quality of care. Short statutes of limitations modestly constrain insurance-premium growth but, again, are already prevalent. Multiple well-designed studies have shown that the other reforms have no effect on liability costs or quality of care.

Many observers may find this an odd time for Congress to be considering malpractice reform. Malpractice environments are currently stable: the incidence of paid claims has shrunk by half in the past decade, indemnity-payment levels have declined or plateaued, and many physicians pay less for liability insurance than they did a decade ago. Price has claimed that defensive medicine is responsible for a quarter of U.S. health care spending — about $650 billion — but the best estimates are closer to $50 billion.

So is a push for liability reform at this moment inappropriate? We don’t think so. The liability system has well-documented problems, and its reform was omitted from the Affordable Care Act. Typically, debates over reform surface during “malpractice crises” when insurance premiums spike, which happens about every 15 years. But when acutely stressed providers are clamoring for immediate relief, cool-headed policy deliberation rarely ensues. A period of calm in liability insurance markets is the best time to proceed with sensible reform.

Safe harbors and administrative compensation are sensible, promising reforms. Both could address physicians’ concerns while serving the needs of injured patients and promoting patient safety. But the details of design and implementation matter. These reforms’ potential is thwarted when the controlling design consideration is maximizing health care providers’ protection against liability. In his confirmation hearings, Price articulated a vision of health system reform that puts patients’ needs front and center. Medical liability reform needs the same vision.