The Fallacy of Tort Reform

by joetalarico

Not a whole lot new has happened, which gives me the opportunity to do what I like best. Having been accurately depicted by George Will as a narcissist who believes that people actually care about my ramblings, I will ramble on, today about tort reform. Being an anesthesiologist for almost 20 years, I have been involved in medical malpractice and personal injury cases, both from the defense and plaintiff’s sides.Regarding medical malpractice, as a physician, the overwhelming majority of my colleagues have bought the line of the AMA that tort reform equals caps on non-economic damages. I am not one of those. History has shown, in California and more recently in Florida that this is not the answer. In California, caps instituted in the late 1970’s had little effect. The malpractice crisis continued until the late 1980’s, when insurance reform was instituted, and insurers refunded $70 million in overcharges. To this day California malpractice premiums are below average, but not because of caps.

Real malpractice tort reform must be multifaceted; there is no magic bullet. It all starts with quality improvement. From personal experience, I can confidently state that quality improvement in hospitals is light years behind that of industry. When was the last time you drove by a hospital and saw a poster that stated the hospital was a six sigma company or ISO 9001 compliant? If you see one let me know, because you’ll have seen one more than I have. Next there must be real insurance reform. Malpractice companies, like other insurance companies, essentially have a license to steal. They have a pure profit motive; collect as high premiums as possible while paying out the least possible benefits. They tend to carry excessive reserves, because these reserves are easy ways to hide actual profits. Large executive compensation packages also are not registered as profits. Unfortunately these companies are shielded from free market self-regulation because they are oligopolies; there are considerable barriers to entry, so each state has few companies from which to choose. For an analogy, just look at the “big three” automakers in the 1970’s. They sold shit for a high price because there were no other viable options. Now that there are many choices, our cars actually start when you turn the key, and we get a much better, safer product for a better price (incidentally, we can thank the government for safety because the companies would not have done that voluntarily).