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The Trial of John Edwards: A Democratic Strategy for Populist Tort Reform

July 8, 2004

Within minutes of Senator John Edwards’ selection by John Kerry as his running mate, the Republicans started their predictable onslaught of attacks on his national security experience and high-profile career as a trial lawyer. An instantaneously updated GOP web site called Edwards “a disingenuous, unaccomplished liberal and friend to personal injury trial lawyers.” Trent Lott (whose wistful, public nostalgia for the days of Jim Crow cost him the Senate majority leadership) called him “a suing lawyer – that’s S-U-I-N-G lawyer.”

The Bush campaign sees the Edwards candidacy as a potential home run in this election, an opportunity for the GOP to kill four birds with one stone. First, they can continue their campaign to demonize trial attorneys, one of the Democrats richest sources of contributors. In addition, Bush and Cheney will try to pummel the Kerry/Edwards ticket as a tool of “parasitic” special interests. Third, Republicans will press their barely hidden agenda to free their business allies from the threat of massive jury awards and class action lawsuits in tort cases involving product liability, medical malpractice and environmental damage. And last, President Bush will aggressively continue his courting of doctors and the health care industry by presenting himself as their protector against Democratic tort lawyers.

In 2004, Democrats should call their bluff, and not just by highlighting the unending hypocrisy of the party of corporate cronyism cynically attacking trial lawyers. Democrats should pursue true tort reform in a grand compromise implementing limited caps on damage awards in exchange for full disclosure from and public regulation of physicians and other health care providers. Let’s call it “Show, Tell and Save.”

The GOP Tips Its Cap

First, a little background. Despite the claims from George Bush and the Republican Party, numerous studies have consistently shown that increasing damage awards from malpractice explain only a portion of the rapid rise in health care costs. A January 2004 study by the Congressional Budget Office (CBO) found from 1986 to 2002, malpractice insurance premiums jumped 15% per year, while the average damage award rose only 8% ($95,000 to $320,000). The jump in malpractice premiums has been almost double the rate of increase in health care costs per person, and roughly four times the rate of inflation. The CBO report also points out that “although the cost per successful claim has increased, the rate of such claims has remained relatively constant. Each year, about 15 malpractice claims are filed for every 100 physicians, and about 30 percent of those claims result in an insurance payment.” As the CBO concludes, GAO data shows that about half of the increase in doctors’ malpractice premiums is due to the drop in annual investment returns by the top 15 insurers. Recent low profit rates and market consolidation among insurers is creating additional upwards price pressure.

Over the past 50 years, the sad truth is that lawsuits have been instrumental in improving public health and safety. Legal action as a last resort against physicians, pharmaceutical firms and other corporations stopped the use of dangerous medical practices, drugs and devices, such as kidney-damaging statin drugs, off-label use of Neurotinin, the IUD, “FenPhen,” and thalidomide, just to name a few. Lawsuits helped highlight workplace and environmental threats (asbestos, DDT) and removed faulty products from the market (Firestone SUV tires, cigarettes). Studies estimate that up to 100,000 people die each year due to medical errors in American hospitals. President Bush may be right that “lawsuits don't heal patients”, but they no doubt prevented countless other deaths and injuries.

That much said, perception and reality do merge in the war against trial lawyers. Certain medical specialties have seen malpractice insurance premiums rise at dramatically higher rates since 1986, including obstetrics/gynecology (22% per year) and internists/general surgeons (33%). Areas of practice such as obstetrics have been decimated as malpractice insurance rates climb for practitioners in the face of a wave of litigation. Entire counties and regions now lack Ob/Gyns or face shortages of other types of physicians. The ever-present fear of litigation, justified or not, weighs heavily on health care providers of all stripes. It’s no wonder physicians in New Jersey held a much-publicized work slowdown last year.

Trying to capitalize on the moment, President Bush and the Congressional GOP are making tort reform a major front in their war against regulation of any kind. Bush and the Senate Majority Leader Dr. Bill Frist (whose former family business is the same Hospital Corporation of America now being investigated by the government for massive Medicare fraud) have been pushing legislation capping awards for non-economic damages (“pain and suffering) at $250,000. Also with the President’s support, Capitol Hill Republicans are wasting no time with the “Class Action Fairness Act” that would require most class action lawsuits to proceed solely through the less plaintiff-friendly federal courts.

The Grand Compromise: “Show, Tell and Save”

Democrats should not back down in holding corporations and caregivers responsibility for the egregious errors they make, the lives they disrupt and the pain they cause. They should avoid the temptation to ban contingency fees or move to a “loser pays” system for civil cases (as in the UK) unless they first devise a credible alternative to ensure legal access and options for all Americans. The impact on less wealthy Americans with legitimate claims would simply be too great.

Democrats can, however, offer President Bush, the GOP and the physicians of America a great deal on malpractice damages. Call it “Show, Tell and Save”, jury awards would be capped (though at higher levels than debated by Congress) and malpractice premiums lowered in exchange for a new regulatory regime and complete information disclosure from doctors, dentists and hospitals. Just let the market decide: give consumers access to full information about health care providers, let state regulators sanction abuses, and the bad doctors and poor performing hospitals will be weeded out. The combination of fewer lawsuits and reduced damages should enable insurers to drop malpractice premiums, providing physicians the relief they seek.

Here’s how “Show, Tell and Save” would work.

First, all physicians, dentists, psychologists, therapists, and other health care providers would have to complete a profile of their practices, made available to consumers over the Internet through a federally managed database. This standard disclosure form would include not only basic information about the specialties of the practice, but a history of all legal action against them, including the dates and awards of past malpractice cases, number of out-of-court settlements, and even threatened legal action. (To protect privacy, no details of the cases or personal information about the patients involved would be provided.) In addition, physicians would be required to disclose any business relationships with and all gifts above $100 from pharmaceutical and other vendors. (If physicians’ prescription histories are going to continue to be available to the drug companies, consumers should have access to them as well.) This online system would let consumers shop for doctors (and hospitals) like cars, doing side-by-side comparisons of prices, safety records, consumer reviews and more. Think of it as for doctors.

Second, physicians and other health care providers must be held accountable for the information they provide. What’s needed here is a health care equivalent of the Sarbanes-Oxley law requiring CEOs to vouch for the validity of corporate financial statements at the risk of criminal penalties and civil liability. Doctors, clinics and hospitals would similarly have to complete and sign their online profiles annually, with penalties for false or erroneous disclosures. Think of it as a “Health Care Accountability Act.”

A third major part of the Grand Compromise would require an overhaul of the regulation, monitoring and sanctioning of physicians and health care providers. Today, the medical profession is essentially self-policing. A hodge-podge of semi-independent state review boards tightly linked to state medical associations and with limited government oversight often control the penalties and punishments for physician malfeasance, including license revocation. Unfortunately, the record of oversight here is one of leniency and slaps on the wrist. Over a period of 7 years, for example, Monmouth and Ocean counties in New Jersey had a total of 8 physicians (out of over 3,000 practitioners) lose their licenses. Texas is even more lax, with the Texas Board of Medical Examiners (TBME) revoking only 11 physician licenses in a five year period, with none since 1997. Worse yet, the proceedings and rulings of these boards are often confidential, with consumers precluded from accessing information that should be critical to their choice of health care providers.

What’s needed instead is new public regulatory regime completely transparent to American consumers. While states can continue to control the licensing process, standards and guidelines should be set nationally. These could be created the Department of Health and Human Services (HHS), or better yet the National Institutes of Health (NIH), in conjunction with the American Medical Association and the network of specialty associations. The “Physician Review Boards” (PRB) would be a state administrative agency, and include civil servants, academics, lawyers and lay people in addition to the requisite medical specialists. It would recertify doctors every five years in a renewal process that should be virtually automatic unless a record of physician malfeasance exists. Its proceedings, reports and rulings would be open to the public, and its sanctions part of the care provider’s publicly accessible record.

In exchange for the reforms above, Democrats should agree to caps on malpractice awards. However, a maximum of $250,000 is simply not sufficient as either a deterrent to bad medical practices or as compensation for patients’ lives forever altered. An initial maximum of $5,000,000 would be a reasonable starting point. (Note that American taxpayers paid the 9/11 families on average $1.6 million for the loss of loved ones.) The awards cap could be revisited every five or ten years, as changing circumstances dictate. These could inflation, breakthrough medical advances, or even (and most unlikely) new insurance regimes such as a national single-payer plan.

Of course, there is a need for much broader reform if there is to be any hope of containing health care costs. Despite the rhetoric of the GOP, the small 3%overhead for government-administered programs such as Medicare is only a fraction of that of private insurers, which often reaches 20%. Aggregate government buying power could dramatically lower prescription costs, yet the 2003 Medicare plan signed by President Bush in December expressly forbids the government for negotiating directly with drug companies. And advertising to consumers for drugs, doctors, lawyers, clinics, hospitals and insurance plans could be banned. (Marketing to providers and institutions would be permitted.)

All of the above suggests a dramatic change in the professional norms and cultural role for both attorneys and health care providers. The days of a self-policing guild system with professional associations acting as gatekeepers to both the public and new competitors would come to an end. The anachronistic and hierarchical doctor-patient relationship of yore would be replaced by the same market metaphors that apply in the rest of the economy. American consumers will purchase products and services from health care providers. And as with financial services and investing, they will need real-time data and perfect information to make self-interested decisions. As any good Republican will tell you, that’s how markets work.

As any politician will tell you, however, it will never happen. The dueling legal and health care lobbies will not easily yield their privileged social positions and concomitant perquisites for the sake of the public good.

So, there will be no grand compromise, and the GOP demonizing of the trial lawyers will just continue. For John Edwards, there will trying times ahead.


Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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