Med Mal Reform: Manhattan Institute v. Cato
Cato adjunct scholar Shirley Svorny‘s recent paper, “Could Mandatory Caps on Medical Malpractice Damages Harm Consumers?,” has sparked a debate with the Manhattan Institute’s Ted Frank at PointOfLaw.com.
The GOP’s Legislative Malpractice
If you read Virginia Attorney General Ken Cuccinelli’s op-ed in Sunday’s Washington Post, you witnessed the too-rare spectacle of a Republican denouncing his own party’s hypocrisy on medical malpractice reform:
With Senate Bill 197 — legislation that would have the federal government dictate how state judges are to try medical malpractice cases and cap what state courts may award — several Republican senators have…take[n] an approach that implies “Washington knows best” while trampling states’ authority and the 10th Amendment. The legislation is breathtakingly broad in its assumptions about federal power, particularly the same power to regulate commerce that lies at the heart of all the lawsuits (including Virginia’s) against the individual mandate of the 2010 federal health-care law. I have little doubt that the senators who brought us S. 197 oppose the use of the commerce clause to compel individuals to buy health insurance. Yet they have no qualms about dictating to state court judges how they are to conduct trials in state lawsuits…
This legislation expands federal power, tramples the states and violates the Constitution. And if it were ever signed into law — by a Republican or Democratic president — I would file suit against it just as fast as I filed suit when the federal health-care bill was signed into law in March 2010 (15 minutes later).
For more on why ObamaCare is unconstitutional see this white paper by Cato chairman Bob Levy. For a discussion of why nearly all federal med mal reforms are unconstitutional, see this Policy Analysis by Bob Levy and Michael Krauss. For a discussion of why mandatory caps on damages may harm patients, see this recent Policy Analysis by Cato adjunct scholar Shirley Svorny. For an individual-rights-based approach to med mal reform, see this paper by yours truly.
Praise (Sort of) for Latest Cato Health Care Study
Physician assistant and health policy wonk Michael Halasy blogs about Shirley Svorny‘s new study on medical malpractice liability reform:
Cato has truly shocked me….stupefied really…
Well, just the other day, I received an update from Cato. Now, Michael Cannon is a good guy, and while he and I simply don’t agree on … well much of anything from a health policy perspective, his colleague, Shirley Svorny, wrote this: “…Reducing physician liability for negligent care by capping court awards, all else equal, will reduce the resources allocated to medical professional liability underwriting and oversight and make many patients worse off. Legislators who see mandatory liability caps as a cost-containment tool should look elsewhere.”
I believe that I have been consistent with this…over and over…caps on noneconomic damages DO NOT WORK.
So, I have to (gulp) swallow some pride, and tip my hat to Cato…Now I need to go take a shower. I feel a little dirty.
It’s a good reminder that libertarians do not fit neatly into the usual political categories. We oppose direct government regulation of health care quality, such as through clinician licensing. But we support indirect regulation, such as through the medical malpractice system, and defend that system from critics who want to impose top-down rules on that system like mandatory caps on noneconomic damages. We prefer bottom-up approaches, like letting free individuals choose their own med mal reforms.
Cato Study: Malpractice Insurance Markets Promote Quality Care, Mandatory Damage Caps Could Undermine Same
Today, the Cato Institute releases a new study:
Could Mandatory Caps on Medical Malpractice Damages Harm Consumers?
Shirley Svorny is an adjunct scholar at the Cato Institute and professor of economics at California State University, Northridge.
Supporters of capping court awards for medical malpractice argue that caps will make health care more affordable. It may not be that simple. First, caps on awards may result in some patients not receiving adequate compensation for injuries they suffer as a result of physician negligence. Second, because caps limit physician liability, they can also mute incentives for physicians to reduce the risk of negligent injuries. Supporters of caps counter that this deterrent function of medical malpractice liability is not working anyway—that awards do not track actual damages, and medical malpractice insurance carriers do not translate the threat of liability into incentives that reward high-quality care or penalize errant physicians.
This paper reviews an existing body of work that shows that medical malpractice awards do track actual damages. Furthermore, this paper provides evidence that medical malpractice insurance carriers use various tools to reduce the risk of patient injury, including experience rating of physicians’ malpractice premiums. High-risk physicians face higher malpractice insurance premiums than their less-risky peers. In addition, carriers offer other incentives for physicians to reduce the risk of negligent care: they disseminate information to guide riskmanagement efforts, oversee high-risk practitioners, and monitor providers who offer new procedures where experience is not sufficient to assess risk. On rare occasions, carriers will even deny coverage, which cuts the physician off from an affiliation with most hospitals and health maintenance organizations, and precludes practice entirely in some states.
If the medical malpractice liability insurance industry does indeed protect consumers, then policies that reduce liability or shield physicians from oversight by carriers may harm consumers. In particular, caps on damages would reduce physicians’ and carriers’ incentives to keep track of and reduce practice risk. Laws that shield government- employed physicians from malpractice liability eliminate insurance company oversight of physicians working for government agencies. State-run insurance pools that insure risky practitioners at subsidized prices protect substandard physicians from the discipline that medical malpractice insurers otherwise would impose.
This study’s findings suggest that supporters of market-based health care reform should ditch their support of mandatory damage caps, and embrace better med mal reforms. It also suggests that government should abandon direct regulation of health care quality, such as through medical licensing.
Federalism and Med-Mal Reform
Thanks to star libertarian lawprof and Cato senior fellow Randy Barnett for pointing out something that has needed saying for a while: most proposals in the U.S. Congress to address medical malpractice law run into serious federalism problems.
Most medical malpractice suits go forward in state courts under state law. If the U.S. Congress wishes to impose a nationwide rule on these suits, such as by limiting damages for pain and suffering, it first needs to answer the question: under which of the federal government’s constitutionally prescribed powers is it acting? Even if it can identify such authority, it should also ask: is it a wise idea—consistent with what one might call a prudential federalism—to gather yet more power in Washington at the expense of the states?
Unfortunately, the backers of the current federal med-mal bill have chosen to rely on the Supreme Court’s very expansive “substantial effects” doctrine, which as Barnett explains:
allows Congress to regulate any economic activity in the country that can be said, in the aggregate, to have a “substantial effect” on interstate commerce. This doctrine was unknown before the 1940s, and goes far beyond the original power to regulate trade between states. This is how most of Congress’ regulatory power has been justified since then.
Although it is followed even by conservative justices, Justice Clarence Thomas has long criticized the Substantial Effects Doctrine on the ground that it exceeds the original meaning of the Constitution.
Let’s step back for a moment to review what’s not at issue here. First, this is not an argument over whether liability reform of some sort is a good idea: in fact Prof. Barnett “strongly support[s] reforming our malpractice laws to protect honest doctors from false claims and out-of-control state juries.” (So do I.)
Nor is this an argument over whether the federal government should simply leave the state courts alone as a general proposition, as some late-blooming friends of federalism on the left side of the aisle seem to suggest. Our constitutional scheme of government is entirely consistent with federal-level supervision of state courts when those courts behave in certain ways, as by violating litigants’ due process, impairing the obligation of contract, or abridging the privileges and immunities of citizens of other states, to name but a few. Article IV, Section 1 confers on Congress a broad charter to prescribe to states “by general Laws” how they are to accord full faith and credit to other states’ enactments. That’s not even counting Congress’s genuine interstate commerce power (as opposed to the on-steroids New Deal version) or various other powers.
Talk of Replacing ObamaCare Is a Bit Premature
Now that a bipartisan coalition in the House has voted to repeal ObamaCare, an even larger bipartisan coalition has approved a Republican resolution directing four House committees to “replace” that ill-fated law. House Resolution 9 instructs the committees to “propos[e] changes to existing law” with the following goals:
- “Foster economic growth and private sector job creation by eliminating job-killing policies and regulations.”
- “Lower health care premiums through increased competition and choice.”
- “Preserve a patient’s ability to keep his or her health plan if he or she likes it.”
- “Provide people with pre-existing conditions access to affordable health coverage.”
- “Reform the medical liability system to reduce unnecessary and wasteful health care spending.”
- “Increase the number of insured Americans.”
- “Protect the doctor-patient relationship.”
- “Provide the States greater flexibility to administer Medicaid programs.”
- “Expand incentives to encourage personal responsibility for health care coverage and costs.”
- “Prohibit taxpayer funding of abortions and provide conscience protections for health care providers.”
- “Eliminate duplicative government programs and wasteful spending.”
- “Do not accelerate the insolvency of entitlement programs or increase the tax burden on Americans;” or
- “Enact a permanent fix to the flawed Medicare sustainable growth rate formula used to determine physician payments under title XVIII of the Social Security Act to preserve health care for the nation’s seniors and to provide a stable environment for physicians.”
Three things about the Republicans’ “replace” effort:
Obama’s Fiscal Commission and Health Care Spending
Following up on what Dan and Chris have said …
If the co-chairs of President Obama’s fiscal commission were serious about reducing federal spending and deficits, they would have proposed eliminating the federal deficit, rather than “reduc[ing] it to 2.2 percent of GDP by 2015.” Yawn. They would have proposed cutting federal spending (currently, 24 percent of GDP and rising) to match federal tax revenue (currently at 15 percent of GDP). But the co-chairs proposed only to “bring spending down to 22 percent and eventually 21 percent of GDP.” Not only does that elicit another yawn, but since the co-chairs only asked for half a loaf, they won’t even get that much.
If the co-chairs were serious about reducing federal spending and deficits, they would have proposed a balanced-budget amendment. They would have proposed block-granting Medicaid. They would have proposed implementing Medicare vouchers immediately. (Vouchers are the only way to reduce Medicare spending while protecting seniors from government rationing. They would also change the political dynamics that repeatedly stymie efforts to reduce Medicare spending.) Instead, the co-chairs propose the same ol’ failed strategy of trying to limit Medicare and Medicaid spending using government price-and-exchange controls, which they euphemistically describe as “rebates” and ”payment reforms.” Along the same lines, they propose strengthening IPAB, ObamaCare‘s rationing board. IPAB’s mandate is — you guessed it — to ration care by fiddling with Medicare and Medicaid’s price and exchange controls. It will therefore inevitably fall prey to the same political buzzsaw. To appease Republicans, the co-chairs propose unwise and unconstitutional federal rules that would prevent patients injured by negligent physicians from recovering the full amount they are due (euphemism: medical malpractice liability “reform”). Finally, the co-chairs propose that if federal health spending continues to grow faster than GDP growth plus 1 percent, Congress should consider “a premium support system for Medicare” (which could mean vouchers) and “a robust public option and/or all-payer system” for people under age 65 — a debate that wouldn’t even begin until 2020.
Fiscal Commission members, congresscritters, and citizens who are serious about reducing federal spending and deficits — and who are looking for specific ways to cut government spending — should instead consult Cato’s excellent web site DownsizingGovernment.org.
Before Administering the Lethal Injection, Dr. Obama Offers to Sterilize the Needle
In a letter to congressional leaders, President Obama wrote of his openness to including Republican proposals in his health care legislation.
Dropping a few Republican ideas into a government takeover of health care is like sterilizing the needle before a lethal injection: a nice thought, but the ultimate outcome is the same.
- Two of the four Republican ideas – federal grants to states that adopt medical malpractice liability reforms, and ratcheting upward Medicare’s physician-price controls – would increase government spending.
- The president’s health savings accounts (HSAs) proposal would merely loosen the noose around consumer-directed health plans.
- Undercover investigations in Medicare and Medicaid are likely to be as unsuccessful as past efforts to combat fraud.
This is not bipartisanship. President Obama is creating the illusion of bipartisanship while taking the most partisan route possible: forcing his legislation through Congress via reconciliation.
(Cross-posted at National Journal‘s Health Care Arena.)
Health Care – One Way to Reduce Costs
In a debate with Larry McNeely in the L.A. Times, Cato’s Michael Cannon suggested “eliminating barriers to competition by nurse practitioners and other mid-level clinicians.”
McNeely responded, “By ending all state licensing and monitoring of physicians…not only qualified nurses but also any quack with a scalpel and some drugs would be able to set up a shingle, call himself a doctor and start cutting.”
Does McNeely pick his doctors at random? How does he know his cardiologist has any relevant experience or training? Licensing creates the impression that all licensed physicians are adequate. Not true. Ask any medical malpractice insurance underwriter.
A state medical license does not restrict a physician’s practice to any particular specialty. If McNeely wants information about a medical professional, he will have to look elsewhere.
State regulation of medical professionals does not insure quality, but does limit access to care and make health care more expensive. Not all audiologists or advanced practice nurses need a doctorate. Physician assistants and advanced practice nurses have been shown to be fully capable of taking over the majority of primary care, yet many states restrict their scope of practice.
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