MedPAC Reviews Medical Malpractice Reforms

The ongoing failure of the current medical malpractice system has led to an increase in both direct and indirect medical costs, prompting consideration of alternative malpractice initiatives at the state and federal levels, according to a report from the Medicare Payment Advisory Commission, or MedPAC.

Senior MedPAC analyst Ariel Winter, M.P.P., who presented the report's findings during a MedPAC meeting here in early April, said the medical malpractice system has not done a good job of compensating patients who are harmed by medical negligence. In addition, the current system has failed to reduce medical errors.

"In fact, the adversarial and punitive nature of the (current) malpractice system may hamper efforts to improve patient safety by discouraging transparency around errors," said Winter.

Moreover, periodic spikes in malpractice premiums have led to reductions in affordability and availability of coverage, further contributing to direct and indirect medical costs.

Direct medical costs include malpractice premiums and legal costs. According to the Congressional Budget Office, the amount spent on malpractice premiums and related legal costs totaled $35 billion in 2009, accounting for about 2 percent of total health care spending.

The indirect cost of medical malpractice refers to additional services ordered by physicians in response to liability risk, also known as defensive medicine. This is a difficult area to quantify because it is hard to determine whether physicians order tests or treatments because of legal concerns or for other reasons, Winter said.

Thomas Dean, M.D., of Wessington Springs, S.D., the only family physician on MedPAC, noted during the question-and-answer segment of the meeting that the indirect forces of medical malpractice are "very powerful, and the fear that pervades the physician community is not a rational response oftentimes."

"I work at a community health center, and I am covered under the federal tort claims act, so I don't even have to worry about buying insurance," said Dean. "But it still affects my practice."

Winter described various state reforms outlined in the report, including caps on noneconomic damages, pretrial screening panels, attorney fee limits, periodic payments and statutes of limitations, among other reforms.

Only caps on noneconomic damages have an effect on key outcomes, Winter said. "There is evidence in the literature that caps reduce the average payment per malpractice claim in the range of 20-30 percent," she said. "They modestly constrain the growth of premiums over time, they modestly improve physician supply, and they reduce defensive medicine for some services."

Winter also discussed two innovative reform approaches, including modifications to the current system and alternative compensation systems.

"These approaches have had limited or no implementation in the United States, and therefore, there is a very small evidence base," said Winter. "However, based on the limited evidence and theoretical predictions, the authors of the report concluded that many of these reforms appear promising and may merit further experimentation."

Under the heading of modifications to the current system, for example, Winter described a schedule of noneconomic damages that involves the creation of a tiered system of medical injuries ranked by severity. A dollar value for noneconomic damages would be assigned for each tier. This type of system would allow judges and juries to use the schedule as an advisory document or as a binding guideline, Winter said.

Winter also described a safe harbor for physicians who adhere to evidence-based guidelines, saying that the goal of this approach would be to strengthen the weight of clinical guidelines during litigation.

"It could help prevent or lead to the dismissal of claims that lack merit," said Winter. "It also could reduce defensive medicine because providers will have more confidence about the legal standard of care."

Dean said the idea of using guidelines and safe harbors is an "appealing one on the surface."

"But I would caution that establishing guidelines that are reliable enough or which cause a broad enough spectrum that they could be used in this kind of a context is extremely difficult to do, especially in a Medicare population where you are dealing with multiple chronic diseases," Dean said.

Winter also noted that the report addresses health courts and administrative compensation systems. In the health court model, a specially trained judge -- usually a physician -- who determines negligence replaces the jury.

This system has "the potential to improve the accuracy and efficiency of decisions," Winter said.

In the administrative model, an administrative agency replaces the court. The agency acts as a mutual fact-finder and adjudicator. It could resolve claims faster with lower overhead costs, said Winter, but the system also could generate more claims by making it easier to file claims.

MedPAC Chair Glenn Hackbarth, J.D., pointed out that this was MedPAC's first discussion about medical malpractice.

"Exactly where we go, obviously, will depend on today's discussion and future discussions," Hackbarth said. "At this point, I wouldn't think that our contribution would be to discuss, evaluate, recommend specific reforms. We've got a lot of different competing ideas out there. I'm not sure that necessarily plays to our strength."

Hackbarth said, however, "discussing the effect of the malpractice system on the Medicare program, the effect on the ability of Medicare beneficiaries to have access to high-quality care at reasonable cost clearly is within our domain."

Dean and other MedPAC members also said the commission should not get too specific when issuing a report on medical liability.

"MedPAC's role is not to get too specific, but to try and clarify what a force (medical malpractice) is," Dean said.