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Abstract:
Using a comprehensive database of closed claims maintained by the Texas Department of Insurance since 1988, this study provides evidence on a range of issues involving medical malpractice litigation, including claim frequency, payout amounts, defense costs, and jury verdicts. The data present a picture of stability in most aspects and moderate change in others. We do not find evidence in claim outcomes of the medical malpractice insurance crisis that produced headlines over the last several years and led to legal reform in Texas and other states. Controlling for population growth, the number of large paid claims (over $25,000 in real 1988 dollars) was roughly constant from 1990-2002. The number of smaller paid claims declined. Controlling for inflation, payout per large paid claim increased over 1988-2002 by an estimated 0.1 percent insignificant) - 0.5 percent (marginally significant) per year, depending on the data set, but actual payouts in tried cases showed little or no time trend. Real defense costs per large paid claim rose by 4.2-4.5 percent per year. Real total cost per large paid claim, including defense costs, rose by 0.8-1.2 percent per year.

The prior working paper version of this paper is available at http://ssrn.com/abstract=678601. The working paper version contains color figures, which were converted to black and white in the published version.

Abstract:
The belief that malpractice lawsuits impede efforts to improve health care quality by encouraging providers to hide mistakes is the conventional wisdom among patient safety advocates and scholars. It also provides the normative basis for efforts currently proceeding at the state and federal levels to curtail medical malpractice exposure. Groups pressing for tort reform, including the American Medical Association, contend that when doctors and other providers are insulated from liability, patients will be better protected from harm.

This article canvasses the evidence bearing on the connection between malpractice exposure and health care quality. Some of this evidence, such as the Harvard Medical Practice Study, shows that the quality of health care improves as the risk of being sued rises; none of it shows that malpractice lawsuits cause the quality of health care to decline. The widely held belief that fear of malpractice liability impedes efforts to improve the reliability of health care delivery systems is unfounded.

The central causes of the high error rates that persist in the health care sector appear to be providers' defective incentives and professional norms. Providers lose money when quality improves, and their norms discourage the creation of non-punitive working environments in which efforts to improve quality can flourish. The business case for quality is missing, and providers' attitudes are antithetical to quality improvement. The tort system's major deficiency is its failure to subject providers to sufficient economic pressure to overcome these impediments. The cause of this shortcoming is the rarity with which injured patients assert legal claims.

medical malpractice, patient safety, health care quality

Abstract:
Employment-based health insurance is the Rodney Dangerfield of U.S. health policy: it gets no respect from anyone. Employment-based coverage ("EBC") may not get much respect, but it covers roughly 177 million people - and it appears to have considerable staying power - even if the principal explanation for that staying power is nothing more compelling than inertia. Given the likely prevalence of EBC for the foreseeable future, it is worth emphasizing four important points about EBC and universal coverage. What these points have in common is that they are myths - most people believe they are true, even though they are not. The four "myths" are these:

* Employers pay for EBC; * There are 45.7 million uninsured Americans; * Universal coverage means everyone will have access to high quality care; * Universal coverage will solve the cost problems of American health care. The paper explains why each of these points are "things people know that aren't so." It then highlights the budgetary and collective action problems with trying to get to universal coverage without relying on EBC, at least for the foreseeable future.

Health Insurance, Employment Based Coverage, Uninsured universal

Abstract:
For more than a century, legal scholarship on the duty to rescue has proceeded on a sophisticated theoretical plane. Proponents of a duty to rescue have argued that it will decrease the frequency of non-rescue without creating undue distortions or other difficulties. Opponents of a duty to rescue have argued that such statutes are ineffective, infringe on individual liberties, may actually discourage rescue, and are likely to be misused by politically ambitious prosecutors. No effort has been made to test any of these claims empirically, even though from a policy perspective, the critical threshold question - how often do Americans fail to rescue one another in circumstances where only a generalized duty to rescue would require them to do so - is entirely factual. This article provides the first empirical study of the no-duty rule in action. Using more than twenty independent data sources, the article provides a "law and reality" perspective on rescue and non-rescue that complicates - and sometimes is flatly inconsistent with - the positions of both proponents and opponents of a duty to rescue. The results paint a rich and largely reassuring picture of the behavior of ordinary Americans faced with circumstances requiring rescue, and indicate that both more and less is at stake in the debate over the no-duty rule than has been commonly appreciated. Law professors and judges have been fascinated with the no-duty rule for theoretical reasons, but the ongoing debate should not obscure the reality that in the real world, rescue is the rule - even if it is not the law.

Abstract:
Health insurance is once again on the policy agenda, and it is déjà vu all over again. There are the same statistics and anecdotes about the uninsured. There are the same reports by government agencies, think tanks, and do-gooder organizations. There are the same policy entrepreneurs, pushing old wine in new (and not so new) bottles, based on the same appeals to social solidarity, self-interest, or both. The interest groups are back in force as well.

Reform proposals are also being pushed by all the usual suspects. The reform proposals vary in their specificity, but all (either implicitly or explicitly) identify the source of the problem as market failure - and promise new regulations and more taxes to fix the problem. This article makes the case that government failure should occupy center-stage in understanding how things came to look the way they do. Rather than market failure, it is our inefficient and perverse regulation of health insurance that should be the focus of our ire, and of regulatory reform.

health insurance, regulation, public choice, federalism

Abstract:
We study defense costs for commercially insured personal injury tort claims in Texas over 1988-2004, and insurer reserves for those costs. We rely on detailed case-level data on defense legal fees and expenses, and Texas state bar data on lawyers’ hourly rates. We study medical malpractice (“med mal”) cases in detail, and other types of cases in less detail. Controlling for payouts, real defense costs in med mal cases rise by 4.6 percent per year, roughly doubling over this period. The rate of increase is similar for legal fees and for other expenses. Real hourly rates for personal injury defense counsel are flat. Defense costs in med mal cases correlate strongly with payouts, both in ordinary least squares (OLS) and in an instrumental variable analysis. They also correlate with the stage at which a case is resolved, and case duration. Mean duration declined over time. Med mal insurers predominantly use outside counsel. Case-level variation in initial expense reserves predicts a small fraction of actual defense costs. In other areas of tort litigation (auto, general commercial, multi-peril, and other professional liability), defense costs rose by 2.2 percent per year. Defense costs in these cases are predicted by the same factors as in med mal cases, plus the presence of multiple defendants. Insurer reserving practices raise some puzzles. Med mal insurers did not react to the sustained rise in defense costs by adjusting their expense reserves, either in real dollars or relative to reserves for payouts. Thus, expense reserves declined substantially relative to defense costs. In other litigation areas, expense reserves rose along with defense costs.

K13, K32, K41

Abstract:
We study defense costs for commercially insured personal injury tort claims in Texas over 1988-2004, and insurer reserves for those costs. We rely on detailed case-level data on defense legal fees and expenses, and Texas state bar data on lawyers' hourly rates. We study medical malpractice ("med mal") cases in detail, and other types of cases in less detail. Controlling for payouts, real defense costs in med mal cases rise by 4.6% per year, roughly doubling over this period. The rate of increase is similar for legal fees and for other expenses. Real hourly rates for personal injury defense counsel are flat. Defense costs in med mal cases correlate strongly with payouts, both in OLS and in an instrumental variable analysis. They also correlate with the stage at which a case is resolved, and case duration. Mean duration declined over time. Med mal insurers predominantly use outside counsel. Case-level variation in initial expense reserves predicts a small fraction of actual defense costs. In other areas of tort litigation (auto, general commercial, multi-peril, and other professional liability), defense costs rose by 2.2% per year. Defense costs in these cases are predicted by the same factors as in med mal cases, plus the presence of multiple defendants.

Insurer reserving practices raise some puzzles. Med mal insurers did not react to the sustained rise in defense costs by adjusting their expense reserves, either in real dollars or relative to reserves for payouts. Thus, expense reserves declined substantially relative to defense costs. In other litigation areas, expense reserves rose along with defense costs.

defense costs, litigation, torts, medical malpractice, insurance

Abstract:
Health care providers and tort reformers claim that the medical malpractice litigation system is rife with behaviors that are irrational, unpredictable, and counter-productive. They attack civil juries, asserting that verdicts are skyrocketing without reason, are highly variable, and bear little or no relation to the merits of plaintiffs' claims. They complain about patients, arguing that the few with valid claims sue rarely, while the many who receive non-negligent treatment sue all the time. They attack greedy lawyers, alleging that they rake in obscene profits by routinely filing frivolous complaints.

Many of the preceding claims are facially implausible. The medical malpractice liability system is an enormous market whose principal trading partners - trial lawyers and liability insurers - are sophisticated, economically-oriented repeat players. They run the system, and they have the knowledge and incentives to select efficient means to accomplish their respective ends. Given this backdrop, their behavior and the behavior of the system they administer should not be random, or even particularly hard to explain. Nor, given the absence of market power and barriers to entry, should attorneys earn more than market-driven returns on the services they provide.

Most of the preceding claims are also inconsistent with empirical studies of the medical malpractice liability system. These studies depict a system that is stable and predictable, that sorts valid from invalid claims reasonably well, and that responds mainly to changes in the frequency of errors and the cost of dealing with them. The system does have a number of pathologies, however, including its loading costs, the snail's pace at which it processes claims, and its failure to compensate patients injured by medical negligence as fully and as often as it should.

It is possible to reform the liability system to address these shortcomings, but tort reform proposals like caps on non-economic damages and attorneys fees will not do so. The goal of these proposals is to reduce insurance prices by making the system less remunerative for claimants. If implemented, these measures will predictably worsen the problem of under-compensation, and weaken providers' incentives to protect patients from avoidable perils.

malpractice, tort reform

Abstract:
Using claim-level data, we estimate the effect of Texas's 2003 cap on non-economic damages on jury verdicts, post-verdict payouts, and settlements in medical malpractice cases closed during 1988-2004. For pro-plaintiff jury verdicts, the cap affects 47 percent of verdicts, and reduces mean allowed non-economic damages, mean allowed verdict, and mean total payout by 73 percent, 38 percent, and 27 percent, respectively. In total, the non-econ cap reduces adjusted verdicts by $156M, but predicted payouts by only $60M. The impact on payouts is smaller because a substantial portion of the above-cap damage awards were not being paid to begin with. In cases settled without trial, the non-econ cap affects 18 percent of cases and reduces predicted mean total payout) by 18 percent. The non-econ cap has a smaller impact on settled cases than tried cases because settled cases tend to involve smaller payouts. The impact of the non-econ cap varies across plaintiff categories. Deceased, unemployed, and (likely) elderly plaintiffs suffer a larger percentage reduction in payouts than living, employed, and non-elderly plaintiffs. We also simulate the effects of different caps, and find substantial differences in cap stringency across states. Different caps reduce aggregate payouts in tried cases (all cases) by between 16 percent and 65 percent (7 percent and 42 percent). Caps on total damages have especially large effects.

damages caps, medical malpractice, texas, settlements

Abstract:
In spring 2006, Massachusetts enacted legislation to ensure universal health insurance coverage to all residents. The legislation was a hybrid of ideas from across the political spectrum, promoted by a moderately conservative Republican governor with national political aspirations, and passed by a liberal Democratic state House and Senate. Groups from across the political spectrum supported the plan, from the Heritage Foundation on the right to Families USA on the left, although the plan had detractors from across the political spectrum as well.

This study briefly describes the basic structure of the Massachusetts plan and identifies the good, the bad, and the ugly. Although the legislation, as Stuart Altman put it, is not a typical Massachusetts-Taxachusetts, oh-just-crazy-liberal plan, there is enough bad and ugly in the mix to raise serious concerns, particularly when the desire to overregulate the health insurance market appears to be hard-wired into Massachusetts policymakers' DNA.

If we want to make health insurance more affordable and avoid the bad and the ugly of the Massachusetts plan, Congress - or, barring that, individual states - should consider a regulatory federalism approach. Under such an approach, insurers and insurance purchasers would be required to subject themselves to the laws and regulations of a single state but allowed to select the state. As with corporate charters, this system would allow employers and insurers to select the regulatory regime that most efficiently and cost-effectively matches the needs of their risk pools. The ability of purchasers and insurers to exit from the state's regulatory oversight (taking their premium taxes with them) would temper opportunistic behavior by legislators and regulators, including the temptation to impose inefficient mandates and otherwise overregulate.

the massachusetts health plan, david hyman, universal health insurance coverage, health insurance, legislation, massachusetts, affordable health insurance, regulatory federalism, insurers, insurance purchasers, laws, regulations, state selection, corporate charters, efficiency, opportunism

Abstract:
In spring, 2006, Massachusetts enacted legislation to ensure universal health insurance coverage to all residents. The legislation was a hybrid of ideas from across the political spectrum, promoted by a moderately-conservative Republican governor with national political aspirations, and enacted by a liberal Democratic state House and Senate. The legislation was boosted by the Heritage Foundation on the right, and Families USA on the left, although it had detractors across the political spectrum as well.

This article considers the legislation through a theatric/cinematic lens - specifically the The Good, The Bad, and the Ugly, a classic Sergio Leone western. The article briefly describes the basic structure of the Massachusetts plan, and identifies the good (return of the states as policy-making bodies in health care; broadening the availability of the federal tax preference for employer-based health insurance; shifting the focus to getting the uninsured to purchase insurance); the bad (play or pay model; inadequacies of an individual mandate) and the ugly (ignoring out-year costs and excessive regulation of the coverage market) of the plan.

Although the legislation is not, as Professor Stuart Altman neatly put it, a typical Massachusetts-Taxachusetts, oh-just-crazy-liberal plan, there is enough bad and ugly in the mix to raise serious concerns - particularly when the desire to over-regulate the health insurance market appears to be hard-wired into the DNA of Massachusetts' health policy.

health, insurance

Abstract:
In Beyond Learned Helplessness, Professor Gregg Bloche surveys the wreckage of past attempts at health care cost containment, and responds to the evident social ills with a typical inside-the-Beltway solution: an expert independent agency. The agency will “set a national agenda for clinical outcomes research, support this research in dependable fashion, develop cost-benefit trade-off principles for medical coverage, and formulate coverage protocols based on these principles.” The resultant scheme would place “binding limits on covered services for Medicare and other federally-funded insurance programs, including extension of coverage to the uninsured. . . [and] a model for the private sector, state Medicaid programs, and state efforts to reduce the numbers of the uninsured.” There are, moreover, shades of these expert panels in virtually every current proposal of the Obama administration for the regulation of health care, often with greater powers than Bloche himself envisions.

Count us doubtful. The history of expert independent agencies does not inspire optimism. Industrial policy has not succeeded in any other area in which it has been tried; price and wage controls, telecommunications, airlines, ground transportation, and agriculture all count as notable failures. If the history of administrative agencies has taught us anything, it is that expertise offers no shield against the corrosive effects of bias – particularly when government regulation is beset by the same problems with information and coordination that make markets difficult to operate.

Decentralized market actors are often better able to identify and use relevant information than a single sclerotic government agency that is beset with administrative and political problems of its own. There is little to be gained by attacking the intractable problems of modern health care policy with process-oriented solutions, or with other regulatory schemes that seek to convert private providers of health care in to public utilities subject to direct government regulation. A direct attack on the substantive issues is necessary.

In section I, we offer a brief critique of the system of positive rights and merit goods that underlie the case for most forms of universal health care coverage. In section II, we identify three practical problems that no working politician can wish away in the effort to implement universal health care coverage: the fundamental principle of diminishing marginal utility; the destabilizing impact of heavily subsidized government-provided coverage on the private market; and the treatment of the full range of existing regulations affecting the delivery of health care services as an exogenous given. We address each of these deficiencies in turn. In section III, we examine briefly six areas where we think massive deregulation is in order: medical malpractice, HIPAA, federal tax law, fraud and abuse, health insurance regulation, and certificate of need/scope of practice limitations. Part IV provides a brief update of our analysis, as of mid-September, 2009 to take into account some of the health reform proposals now under consideration in Congress. Part V concludes.

We anticipate that our proposals will be met by howls of protest from those who benefit from the status quo or who stand to gain from the expansion of federal regulatory authority. The complaints of these apologists for expanded state power should be seen for what they are – a defense of rent-seeking by new political players, incumbent providers, or both. The whole point of deregulation is to limit the opportunity and rewards of rent-seeking, thereby increasing consumer surplus. No administrative agency or committee of experts, no matter how well intentioned and knowledgeable, will be able to do a better job of meeting consumer demands than the private market. To think otherwise is to repeat the mistakes of the past, instead of learning from them.

Abstract:
Physicians' insuring practices influence their incentives to take care when treating patients, their risk of making out-of-pocket payments in malpractice cases, and the adequacy of compensation available to injured patients. Yet, these practices and their effects have rarely been studied. Using Texas Department of Insurance data on 9,525 paid malpractice claims against physicians that closed 1990-2003, we provide the first systematic evidence on levels of coverage purchased by physicians with paid liability claims and how those levels affect out-of-pocket payments and patient compensation. We find that these physicians carried much less insurance than is conventionally believed, that their real primary limits declined steadily over time, that policy limits often act as effective caps on recovery, and that personal contributions by physicians to close claims were rare. Our findings call into question a number of common assumptions about the relationship between physician insuring practices and the medical malpractice liability system.

For a shorter, summary version of this research, see Charles Silver, Kathryn Zeiler, Bernard Black, David Hyman & William Sage, Malpractice Payouts and Malpractice Insurance: Evidence from Texas Closed Claims, 1990-2003, Geneva Papers on Risk and Insurance yyy-zzz (forthcoming 2008), available at http://ssrn.com/abstract=983199.

medical malpractice, insurance, liability

Abstract:
Legal scholars, legislators, policy advocates, and the news media frequently use jury verdicts to draw conclusions about the performance of the tort system. However actual payouts can differ greatly from verdicts. We report evidence on post-verdict payouts from the most comprehensive longitudinal study of matched jury verdicts and payouts. Using data on all insured medical malpractice claims in Texas from 1988-2003 in which the plaintiff received at least $25,000 (in 1988 dollars) following a jury trial, we find that most jury awards received "haircuts." Seventy-five percent of plaintiffs received a payout less than the adjusted verdict (jury verdict plus pre-judgment and post-judgment interest), 20 percent received the adjusted verdict (within + 2 percent), and 5 percent received more than the adjusted verdict. Overall, plaintiffs received a mean (median) per-case haircut of 29 percent (19 percent), and an aggregate haircut of 56 percent, relative to the adjusted verdict. The larger the verdict, the more likely and larger the haircut. For cases with a positive adjusted verdict under $100,000, 47 percent of plaintiffs received a haircut, with a mean (median) per-case haircut of 8 percent (2 percent). For cases with an adjusted verdict larger than $2.5 million, 98 percent of plaintiffs received a haircut with a mean (median) per-case haircut of 56 percent (61 percent). Insurance policy limits are the most important factor explaining haircuts. Caps on damages in death cases and caps on punitive damages are also important, but defendants often paid substantially less than the adjusted allowed verdict. Remittitur accounts for a small percentage of the haircuts. Punitive damage awards have only a small effect on payouts. Out-of-pocket payments by physicians are rare, never large, and usually unrelated to punitive damage awards. Most cases settle, presumably in the shadow of the outcome if the case were to be tried. That outcome is not the jury award, but the actual post-verdict payout. Because defendants rarely pay what juries award, jury verdicts alone do not provide a sufficient basis for claims about the performance of the tort system.

Jury verdict, malpractice, payout, haircut

Abstract:
Background. This study is the first to quantify physicians' malpractice insurance limits. It also examines the connection between policy size and payments on claims, including the frequency of settlement at the policy limits and the frequency of out-of-pocket payments.

Methods. Statistical analyses using data collected by the Texas Department of Insurance (TDI) covering all insured medical malpractice claims against physicians closed between 1990 and 2003 with payment of $25,000 or more (measured in 1988 dollars).

Results. Contrary to conventional wisdom, per-occurrence limits of $500,000 or less were as common as $1 million limits. Nominal policy size was stable over time, but real policy size declined. Settlements at limits were common, and above-limits payments were rare, suggesting policy limits cap recoveries. Physicians infrequently made out-of-pocket payments regardless of policy size, but the frequency declined as policy size increased. Results are presented separately for "perinatal physicians."

Conclusions. The reported findings are contrary to common claims in policy debates and in the health policy literature. Policy limits appear to act as de facto caps on recoveries. Further research is needed to determine how the relationship between policy limits and recoveries affects malpractice claim outcomes and physician insuring practices.

For a fuller exploration of physician policy limits and out of pocket payments, see Kathryn Zeiler, Charles Silver, Bernard Black, David Hyman & William Sage, Physicians' Insurance Limits and Malpractice Payments: Evidence from Texas Closed Claims, 1990-2003, Journal of Legal Studies (forthcoming 2007), available at http://ssrn.com/abstract=981192.

liability insurance, claims analysis, medical malpractice, insurance policy limits

Abstract:
Health care fraud and abuse reportedly accounts for 10% of total spending on health care, or about $120 billion per year. Not surprisingly, Congress has granted fraud control personnel sweeping powers with which to attack the problem. Unfortunately, effectively addressing health care fraud is exceedingly complicated, particularly in light of recent major changes in the medical marketplace and the social context of such conduct. Broadly speaking, physicians view such conduct as essential to ensure high quality care; program administrators view it as the price of the program; fraud control personnel view it as criminal misconduct; and the public's view depends greatly on who is benefitting. Social norms regarding health care fraud vary among these groups as well. The article examines the practical and theoretical challenges associated with attacking health care fraud, and the merits of the current fraud control regime, in light of these considerations.

Abstract:
Institutional Review Boards ("IRBs") are polarizing institutions. IRB supporters view them as the best thing since sliced bread. Detractors believe IRBs impose costs and have no benefits. Supporters point to the good faith and hard work of those who volunteer to serve on an IRB. Detractors suggest that IRBS emphasize bureaucratic busy-work. Supporters ask for more money and more staff so they can do an even more thorough job reviewing research protocols. Detractors point out that the IRB framework of research oversight would never be approved by an IRB. Supporters counter that notorious examples of abuse (e.g., Tuskegee and Nuremberg) show that IRBs are necessary. Detractors respond with anecdotes of IRB stupidity and incompetence. Supporters argue that conducting research is a privilege, not a right. Detractors complain about censorship, restrictions on academic freedom, and the chilling of constitutionally protected free speech. Both sides then return to their respective camps, secure in the knowledge that they are right and those on the other side are self-righteous zealots.

The controversy over IRBs arises from differing preferences, methodological commitments, and risk tolerances. Both sides believe fundamental principles (academic freedom/censorship v. the protection of vulnerable human subjects) are at stake, so the dispute is not readily subject to compromise. Even King Solomon would find it difficult to solve the controversy in a way that makes everyone happy - and the original Solomonic strategy (cutting the director of each IRB in half) seems unlikely to do the job. This article offers some perspective on the dispute, and some modest strategies for improving on the status quo.

Abstract:
Amnesia is a common, important, but rarely noted side effect of antibiotics. Apart from medical historians, few recall the severe morbidity and mortality once associated with acute bacterial infection. However, decades of antibiotic overuse and misuse have compromised the long-term availability and efficacy of these life-saving therapies. If designed and implemented appropriately, regulation can reduce the risk of bacterial infection, reserve antibiotics for circumstances where they are necessary, and rationalize the use of the most powerful agents. Regulation of antibiotic resistance can be justified, and should be guided, by both efficiency and fairness. A range of regulatory options are available - some information-based, some incentive-based, some command-and-control - each of which has indications, strengths, and weaknesses. A desired set of regulatory strategies must then be matched with the appropriate legal and regulatory institutions. A renewed focus on regulatory and institutional design has significant potential to reduce antibiotic-resistant bacterial infections and increase the effective life of existing and new antibiotics.

Antibiotic, antimicrobial, resistance, regulatory theory, regulation

Abstract:
In 2003, Texas adopted House Bill 4 ("HB 4") which capped non-economic damages in medical malpractice cases and included several other smaller reforms. To proponents, HB 4 is a silver bullet, encouraging physicians to move to Texas by reducing frivolous lawsuits, preventing excessive damage awards by run-away juries, and reducing malpractice insurance premiums. To critics, it is ineffective (because it will neither materially increase the number of physicians, lower malpractice premiums, nor reduce health care costs) and unfair (because it forces injured patients to accept inadequate compensation and hits plaintiffs who are severely injured, women, children, or elderly especially hard).

In this short paper, prepared for a special issue on the effects of HB 4, we present new evidence of its effect on the number of physicians in Texas. There is, as yet, no evidence that HB 4 increased the number of physicians involved in direct patient care, but some evidence consistent with a delayed effect. There may have been a modest increase in the number of specialists engaged in direct patient care, in line with population growth. We also summarize our findings from a previous article on how the damages cap will affect payouts. We estimate that, if the same cases were brought, the cap would result in an18-25% drop in per-case payouts in settled cases, and a 27% drop in tried cases. We also find that a cap on non-economic damages will have different effects on different groups of plaintiffs, with larger effects on the unemployed and deceased, and likely on the elderly as well. Because one would expect the cap to dissuade some plaintiffs from suing at all, especially those in the more severely affected groups, the cap's effect on insurers' costs -- and thus its long-run effect on malpractice insurance premiums -- will likely exceed our per-case estimates.

medical malpractice, tort reform, physician supply, damage caps

Abstract:
This article responds to a provocative article on American health policy by Professors Clark Havighurst and Barak Richman. Havighurst & Richman argue from a market-oriented perspective that the health care system is "rigged against the true interests of the political majority," and this "systematic exploitation of the majority by affluent minorities" is both a "breathtaking injustice" and a "extortion-like protection scheme."

Unfortunately, Havighurst & Richman don't say much of anything about concrete reforms they want enacted. Worse still, Havighurst & Richman don't say anything at all about how to get there from here. Both are important failings. Havighurst & Richman have plenty of company in ignoring the ways and means of policy, but their indictment isn't going to have the intended effects (or, dare one say it, any effect whatsoever) without a concrete plan for implementation.

Accordingly, my response offers a short "how to" guide for those interested in moving from diagnosis to treatment. It provides six rules of "hacking" derived from my time in Washington, and years spent watching hacks and wonks at play in the fields of health policy. Those who object to these rules, or to the tone with which they are described are, by definition, wonks.

Abstract:
Compared to other industries providing products of comparable sophistication and cost, health care delivery in the United States is extremely fragmented. This degree of fragmentation is not accidental, and it has numerous causes. Yet, the way in which health care providers are paid should be accorded prominent place - particularly when one adds in the effects of the regulatory framework necessary to administer and police the boundaries of the payment system. Our encounter-based, primarily fee-for-service payment system has a distinct tendency to reward unbundling and inefficiency. Even under the best of circumstances, the current payment system does not create systematic incentives to deliver efficient high quality care. The impact of these misaligned incentives is magnified by the civil and criminal penalties that await those foolish enough to try to rationalize (and/or) exploit these inefficiencies.

If we want to address health care fragmentation, reform of the payment system should be high on the list of priorities. Yet, attempts to reform the payment system will create numerous opportunities for those who profit from the status quo to engage in symbolic blackmail. Furthermore, it remains to be seen how much fragmentation consumers actually want; the preferences of reformers may well differ from that of consumers. Aspiring reformers should be aware of these risks and frame their efforts accordingly.

Fragmentation, health, delivery, payment, p4p, coordination, bundled

Abstract:
Until recently, physicians argued that malpractice liability should be restricted because medical errors were few and far between. As the empirical literature made that position indefensible, physicians have conceded that medical errors are common, but they continue to call for tort reform, arguing that the alarmingly high frequency of medical errors is the legal system's fault. Malpractice liability is seemingly destined (at least among providers) to be always part of the problem, and never part of the solution. But why would a policy of penalizing unwanted conduct and mistakes not have an important role to play in a comprehensive strategy to make health care safer? The view that sanctions discourage targeted behaviors is at least as plausible as the assertion that punishments make errors more common; in our view, it is more plausible.

malpractice, malpractice liability, physicians, medical errors, health care, sanctions

Abstract:
All insurance has coverage limits, and insurers usually control whether a case is settled or tried. If the insurer rejects a within-limits settlement offer, the risk of an above-limits verdict is borne by the insured. In response, virtually every state has enacted a “duty to settle,” which creates incentives for plaintiffs to make at-limits offers and for insurers to accept those offers where expected damages exceed limits. We study how the duty to settle affects claim duration and defense costs using detailed closed claims data from Texas for 1988-2005.

We find that medical malpractice cases against physicians that settle at limits close about five months faster than similar below-limits cases - a 20% reduction in time from suit filing to settlement, controlling for payout, type of harm, and other observable factors. At-limits cases also have substantially lower defense costs, controlling for case duration and complexity. It is difficult to obtain an at-limits payout without a lawyer. When there is an above-limits payout, it is primarily paid by the insurer. We find consistent results for other types of personal injury cases.

at-limits offer, medical malpractice settlement, tort reform, bad faith

Abstract:
Federal regulations require all research funded by the federal government and involving human subjects to be overseen by an institutional review board (IRB) that evaluates whether the risks to subjects are minimized; whether those risks are reasonable in light of expected benefits; and whether subjects are selected in an equitable manner. IRBs have come under intense criticism since their creation, for obstructing legitimate, low-risk research and approving questionable, high-risk research. The important question to ask about IRBs is not whether they are perfect, but whether they are the "least worst" institutional response to the problem of balancing the marginal cost and marginal benefit of research and research oversight. Even judged by this modest standard, IRBs fall well short.

the pathologies of instititional review boards, david a. hyman, federal regulations, IRB, institutional review boards, research, human subjects, federal funding, risks, benefits, criticism, marginal cost, marginal benefit, asymmetry, performance, judicial oversight

Abstract:
Medical malpractice litigation is costly and time-consuming. Professor Jeffrey O'Connell, with various coauthors, has long advocated 'early offer' rules that would encourage defendants to offer to settle for economic damages plus attorney fees, and punish plaintiffs who refuse such offers. Using detailed closed claims data from Texas for 1988-2005, we simulate the effects of these 'early offers.'

We find that defendants will normally not make early offers in cases with large economic damages (over $500,000 in 1988 dollars) because doing so will increase payouts. Early offers will normally reduce payouts, and hence will be made, in cases with small economic damages (under $100,000 in 1988 dollars). Defendants may also make offers in cases with moderate ($100,000-500,000) economic damages, depending on case characteristics and the plaintiff’s chances of prevailing.

An early offer program will (i) sharply reduce payouts in cases with small economic damages; (ii) will not materially affect predicted payouts in other cases; (iii) will have very different effects on different types of plaintiffs, with large payout reductions for elderly and deceased plaintiffs and much smaller effects for newborns and employed adult plaintiffs; and (iv) will overlap substantially in its effects with statutory caps on non-economic damages, and hence have a smaller effect in states with these caps.

Our mixed results contrast sharply with dramatic claims by O’Connell and co-authors, who predict 70% reductions in payouts and defense costs. Their estimates reflect the compound effects of a series of unreasonable assumptions.

litigation, settlement, early offers, medical malpractice, torts