Thinking of caps

Risk & Insurance, May, 2004 by Denise H. Houghton

The alarming and ongoing medical malpractice debates have placed the insurance industry and the health care profession squarely front and center. Daily accounts of physicians abandoning their home states because they can't buy malpractice insurance complement stories of carriers seeking bankruptcy protection or insolvency. This controversy among physicians, legislators, lawyers and insurers has unleashed different approaches to fix the system, from capping awards only for obstetricians and gynecologists to imposing rate reforms on insurance companies.

When the dust settles, there needs to be a rational response to this health-care crisis to produce reforms for the insurance industry.

Simply put, the crisis can be characterized by rising premiums and a profound shortage of carriers willing to underwrite the high risk of medical malpractice claims. As with so many issues with multibillion-dollar price tags, medical malpractice has become a key matter of contention in congress. The malpractice reform bill proposes to cap the non-economic damages of pain and suffering at $250,000. One variation sought to limit the cap only to obstetricians and gynecologists. Currently, 26 states have implemented some form of caps on non-economic damages and those remaining are resisting with every bit of political muscle they can muster.

Imposing caps on pain and suffering losses, perhaps at the $250,000 level now proposed in congress, is the best approach to slow down the escalating malpractice awards.

However, there is some credence to the criticism levied at broad-based caps. Thus, a universal stopgap measure is unlikely to be implemented anytime soon. So how can the industry get a handle on malpractice costs? Clearly it's an uphill battle, but, in lieu of caps, consider the following solutions:

* Create a special court. Look at the anatomy of the medical malpractice lawsuit. The subject matter of many malpractice cases is complex and average jurors probably don't understand the key issues. To ensure peer review, create a "medico-legal" court of law where a designated panel of judges comprised of a spectrum of professionals, such as lawyers, physicians, scientists and engineers, hear the case.

* Establish a method for initiating medical malpractice cases. Creating methods that stipulate how medical malpractice lawsuits are initiated at the outset would help. Those measures might include reducing the applicable statute of limitations, and abolishing joint and several liability.

* Create general reforms after the initiation of lawsuits. After lawsuits are filed, insurers can implement a merit-based filing system. To reduce verdict amounts, and ultimately lessen the impact on the insurance industry, allow juries to consider collateral sources--compensation from other sources, such as workers' compensation awards.

Reforms are a certainty. The present crisis has had a profound effect on the industry and a devastating effect on the delivery of health care. While attractive, stopgap measures are unlikely to be implemented nationally. Instead, the medical, legal and legislative communities might be more receptive to other more deliberate reforms initiated by the insurance industry that remind us of why the liability system was created in the first place.

DENISE H. HOUGHTON, R.N., is chairwoman of the medical devices defense department at the law firm of Cozen O'Connor.