Cost-Containment And The Need For Health Courts
By Philip K Howard
American health care may bankrupt the nation, unless the waste is wrung out of the system. The size of that waste is staggering: $700 billion[1] to $1 trillion[2] every year — an estimated 30 percent to 40 percent of total costs[3].
Studies indicate that the largest drivers of waste, with rough percentages each contributing to unnecessary costs, are these: fee-for-service incentives for unnecessary care (50 percent)[4], the lack of consumer responsibility (40 percent)[5], defensive medicine (20 percent)[6], excess bureaucracy (20 percent)[7] and fraud (10 percent)[8].
The numbers total more than 100 percent because the skewed incentives overlap — a doctor orders expensive tests because it is profitable, provides a potential defense in a lawsuit, and the patient has no financial incentive to question the decision. Fraud thrives in a dense bureaucratic thicket with no patient incentive to check the false invoice.
Defensive medicine alone is ubiquitous. A 2005 survey in the Journal of the American Medical Association found that 93 percent of high-risk specialists in Pennsylvania admitted to the practice[9], and 83 percent of Massachusetts physicians did the same in a 2008 survey. The same Massachusetts survey showed that roughly 25 percent of all imaging tests were ordered for defensive purposes[10].
Defensive medicine is notoriously hard to quantify, but some estimates place the annual cost at $100 billion[11] to $200 billion[12] or more. Quantification is difficult because defensiveness is now embedded in the culture of American health care; it’s hard to separate the financial incentives from the distrust of justice. Yet every physician, and most patients, can give examples.
In a recent letter to The Wall Street Journal, a Texas doctor described how, since being unsuccessfully sued in 1995, he has “doubled and tripled the number of tests and consultations that I order.[13]”
Containing costs requires a legal framework that, instead of encouraging waste, encourages doctors to focus on what’s really needed. One pillar in a new legal framework is a system of justice that is trusted to reliably distinguish between good care and bad care. Reliable justice would protect doctors against unreasonable claims and would expeditiously compensate patients injured by mistakes.
The key is reliability. Studies have repeatedly demonstrated that the current ad hoc system of justice, with verdicts that vary widely from one jury to the next, has spawned a culture of legal fear and self-protection. Traditional “tort reform” — merely limiting noneconomic damages — is not sufficient to end defensive medicine, because doctors could still be liable — in the case of obstetricians, for millions of dollars — when they did nothing wrong.
Creating special health courts is the proposal advanced by most serious observers to eliminate the incentives for defensive medicine — including support by consumer groups such as AARP, patient safety groups, medical societies such as the American College of Obstetricians and Gynecologists and the American Medical Association, and by such thought-leaders as former U.S Senator and presidential candidate Bill Bradley[14], former Administrator of Medicare and Medicaid Mark McClellan, former Speaker of the U.S. House of Representatives Newt Gingrich[15], and New York Times columnist David Brooks[16].
The public also overwhelmingly supports health courts — a 2009 national survey released by Common Good and the Committee for Economic Development shows that 67 percent of the public favored the reform initiative[17].
The goal of health courts is not to stop lawsuits but to deliver fair reliable decisions. The simple truth is that the current medical liability system isn’t working well for anyone except plaintiffs’ attorneys — not for patients, not for doctors, not for the American public as a whole.
Medical providers have long complained about the unreliability of ad hoc medical justice. The system has a 25 percent error rate. Some may be comfortable with those odds. But for the one out of every four doctors who is incorrectly deemed negligent, the impact on reputation, career and livelihood is devastating. Even when the judge or jury ultimately reaches the right conclusion, the financial and reputational costs of prolonged litigation can change a doctor’s life.
The reality is that patients don’t fare much better. Fewer than 5 percent of patients injured due to negligence seek justice, let alone receive compensation. Even when patients are compensated, the current system takes five years on average to resolve their claims and wastes 54 percent of the award on attorneys’ fees and administrative costs. And the system is inequitable; it fails to treat similarly injured patients in like manner. The result is jackpot justice.
The American public suffers because medical errors persist mostly unabated. The system causes fear that does not translate into improved patient safety. In fact, reports by the Institute of Medicine and others have confirmed that legal fear, caused by the current system and the perceived unreliability of justice, impedes quality improvement efforts.
In addition, legal fear chills the relationship between doctors and patients. One pediatrician told me matter-of-factly, “I don’t deal with patients the same way anymore. You wouldn’t want to say something off-the-cuff that might be used against you.” The sentiment is echoed throughout the profession.
A proposal for special health courts was developed through a joint venture between Common Good and the Harvard School of Public Health, with the support of the Robert Wood Johnson Foundation, to restore reliability, increase efficiency, improve patient safety and reduce costs associated with defensive medicine.
The health court concept includes several core elements, including:
- Experienced judges. Health court judges would be selected through an independent, nonpartisan screening process. They would have expertise in medical issues and receive additional training to ensure continued understanding of evolving issues in health care.
- Written rulings. Health court judges would make decisions about proper standards of care and issue written rulings. These rulings would develop a body of controlling precedent on what constitutes good medical practice and provide guidance for future decisions. Increased consistency from case to case would send clear signals to healthcare providers and mitigate legal uncertainty.
- Neutral experts. Health court judges would consult with neutral experts to determine the standard of care in medical injury cases. These neutral experts would be compensated by the court, with oversight by a regulatory authority to enforce objectivity. Parties would still be entitled to hire additional experts at their own expense.
- Expedited decision-making. Health courts would expedite the claims process by applying a simpler standard for recovery, providing full compensation of economic damages for injuries based on preventable error, and using a payment schedule to compensate for noneconomic damages based on type of injury.
- Coordinated patient safety efforts. Information gathered during the claims process would be reported systematically to patient safety authorities and back to providers for root cause analyses of what went wrong and why. Standardized event reporting would ensure consistency of data and facilitate the development of quality improvement initiatives and preventive practices.
Health courts are expected to compensate more patients at a dramatically lower overhead cost. Most importantly, by providing a system of justice that aspires to make rulings based on accepted medical standards, health courts should substantially eliminate the need for “defensive medicine.”
Despite the promise of health courts, some have questioned their legality, because health courts would replace juries with judicial decision-makers. But the constitutional authority to create an administrative compensation system is clear as long as the system is part of a comprehensive regulatory plan to improve health care. Several administrative compensation systems, such as workers’ compensation, have already withstood constitutional challenge.
In addition, the idea of special courts is hardly a radical one. Our nation has scores of special courts, precisely in areas where special expertise is needed to achieve consistent and expeditious justice — bankruptcy courts, tax courts, mental health courts, drug courts, workers’ compensation tribunals, Social Security tribunals, vaccine liability courts, family courts, you name it.
As leaders in Washington look for meaningful ways to move forward with health care reform, they should reconsider the potential of health courts to promote reliability, fairness, efficiency and transparency. So far, the major obstacle in Congress has been the trial lawyers, one of the largest contributors to congressional Democrats and a major beneficiary of unreliable justice.
Last August, when former DNC Chair Howard Dean was asked why there was nothing in the health care proposals about liability reform, he replied in a moment of notable candor: “The reason that tort reform is not in the bill is because the people who wrote it did not want to take on the trial lawyers ... And that is the plain and simple truth.”
But the time is rapidly approaching when Congress can no longer afford to put special interests ahead of the public interest. A recent national CBS/New York Times poll could not have been clearer:
Among those surveyed, 80 percent said that members of Congress are more interested in pandering to special interest groups than in serving the needs of people who elected them.
Health care costs are skyrocketing, putting more and more Americans out of reach of health insurance. Massachusetts voters sent a clear message to Congress with the election of Republican Scott Brown to fill the “Kennedy Seat” in the Senate. And outrage in California over proposed increases to health insurance premiums is spreading nationally.
The American people want Congress to address skyrocketing health care costs. Health courts are a solution waiting to be implemented.
References
[1] Jennifer Robinson, “The Other $700 Billion Question,” GALLUP Management Journal, Nov. 13, 2008; gmj.gallup.com/content/111778/other-700-billion-question.aspx
[2] PricewaterhouseCoopers Health Research Institute, “The Price of Excess,” 2008; http://www.pwc.com/us/en/healthcare/publications/the-price-of-excess.jhtml
[3] National Coalition on Health Care, Press Release: “NCHC White Paper Identifies over $1 Trillion in Cost-Savings,” Oct. 22, 2009; http://www.nchc.org/documents/Press%20Releases/PR%2010-23-09%20NCHC%20WHITE%20PAPER%20Press%20Statement.pdf
[4] Atul Gawande, “The Cost Conundrum,” The New Yorker, June 1, 2009; http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande
[5] McKinsey Global Institute, “Accounting for the Cost of US Health Care,” November 2008; http://www.mckinsey.com/mgi/publications/US_healthcare/pdf/US_healthcare_Chapter1.pdf (see pp. 39-40, and also “The Price of Excess” and Darshak Sanghavi, “Talk to the Invisible Hand,” Slate.com, Sept. 28, 2009; http://www.slate.com/id/2229839/ (citing the RAND Health Insurance Experiment which found that “[w]hen patients were forced to shoulder one-quarter of their medical costs, ... overall medical spending fell a remarkable 20 percent.”))
[6] “The Price of Excess” at p.6 (see also Lawrence J. McQuillan, “CBO Underestimates Benefits of Malpractice Reform,” The Wall Street Journal, Oct. 23, 2009; online.wsj.com/article/SB10001424052748703573604574491690229571588.html)
[7] Dr. Steffie Woolhandler, et al., “Costs of Health Care Administration in the United States and Canada,” New England Journal of Medicine, Aug. 21, 2003; content.nejm.org/cgi/content/full/349/8/768
[8] National Health Care Anti-Fraud Association Anti-Fraud Resource Center, “The Problem of Health Care Fraud”; http://www.nhcaa.org/eweb/DynamicPage.aspx?webcode=anti_fraud_resource_centr&wpscode=TheProblemOfHCFraud
[9] Dr. David M. Studdert, et al., “Defensive Medicine Among High-Risk Specialist Physicians in a Volatile Malpractice Environment,” Journal of the American Medical Association, 293; 21, June 1, 2005; jama.ama-assn.org/cgi/content/full/293/21/2609
[10] Massachusetts Medical Society, “Investigation of Defensive Medicine in Massachusetts,” November 2008; http://www.massmed.org/AM/Template.cfm?Section=Research_Reports_and_Studies2&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=27797
[11] Daniel Kessler and Mark McClellan, “Do Doctors Practice Defensive Medicine?” Quarterly Journal of Economics, Vol. 111, No. 2, 1996, pp. 353–90
[12] “The Price of Excess” at p.6
[13] Dennis H. Murphree, “We All Pay for Defensive Medicine,” The Wall Street Journal, July 22, 2009; online.wsj.com/article/SB10001424052970204271104574294212435357296.html?mod=googlenews_wsj
[14] Bill Bradley, “Tax Reform’s Lesson for Health Care Reform,” The New York Times, August 29, 2009; http://www.nytimes.com/2009/08/30/opinion/30bradley.html?_r=3
[15] Newt Gingrich and Wayne Oliver, “Selling Out Doctors to Pay Off Trial Lawyers,” Politico, Sept. 3, 2009; http://www.politico.com/news/stories/0909/26707.html
[16] David Brooks, “The Dime Standard,” The New York Times, Sept. 10, 2009; http://www.nytimes.com/2009/09/11/opinion/11brooks.html?_r=1&hpw
[17] Common Good and the Committee for Economic Development, Press Release: “New Nationwide Poll Finds Most Americans Want Medical Malpractice System Changes as Part of Health Care Reform,” Sept. 10, 2009; commongood.org/assets/attachments/Press Release.doc
Originally Published in the March 9, 2010 edition of Law360.
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